Low-price stocks gain attention as a small corpus can create a diversified portfolio. A bonus is if the stock offers a healthy dividend. The focus of this column is on under-$10 stocks that are worth holding for the next 24 to 36 months for high total returns.
An important point is that low-price stocks do not necessarily imply stocks with weak fundamentals. There are attractive stories to consider in the list of stocks under $10. I have screened dividend stocks under $10, trading at a valuation gap among the sea of names. Therefore, capital gains can be meaningful in these names besides a healthy dividend yield.
I must add that these stocks under $10 represent companies with good fundamentals. Therefore, while I have discussed an investment horizon of 36 months, holding these stocks for the long term is unlikely to be a concern.
Let’s discuss the reasons to be bullish on these low-price stocks.
Nordic American Tankers (NAT)
From deeply undervalued levels, Nordic American Tankers (NYSE:NAT) stock has trended higher by 47% year-to-date. NAT stock still trades at a forward price-earnings ratio of 7.9 and looks attractive. Further, the stock offers a robust dividend yield of 11.7%. I expect healthy total returns from the stock in the next 24 months.
As an overview, Nordic American is a crude oil tanker company with a current fleet of 19 Suezmax tankers. The company has benefited from attractive tanker day rates, which have translated into healthy cash flows.
To put things into perspective, Nordic Americans reported an average time charter equivalent rate of $39,300 per day per ship. This was one of the strongest second quarters in the Company’s 28-year history.
It’s also worth noting that the Company’s net debt per ship stands at $8.4 million. With high financial flexibility, the Company is positioned to pursue fleet expansion if the market outlook remains positive. This will further support dividend growth.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) is another attractive name among under-$10 stocks worth considering at current levels. KGC stock offers a dividend yield of 2.15% and trades at an attractive forward price-earnings ratio of 13.9.
It’s worth noting that gold is trading above $2,000 an ounce. With the possibility of rate cuts in 2024, I expect gold to break out after an extended period of consolidation. Kinross Gold is among the best-emerging gold miners with an investment-grade balance sheet. As cash flows swell in the coming quarters, the company will be positioned to pay higher dividends.
As of Q3 2023, Kinross reported a liquidity buffer of $2 billion. The company also reported operating cash flow of $406.8 million for the quarter. As gold trends increase, the OCF visibility for 2024 is more than $2 billion. This positions Kinross for organic and inorganic growth. Further, I expect a healthy upside in dividends.
Aegon (AEG)
Aegon (NYSE:AEG) is another attractively valued dividend stock under $10 that’s worth buying. AEG stock trades at a forward price-earnings ratio of 14 and offers a dividend yield of 5.62%. The stock has been largely sideways for year-to-date, and I expect a breakout on the upside.
As an overview, Aegon provides insurance, pensions, retirement, and asset management services. The company is in the United States, United Kingdom, China, and Brazil, among other countries.
With growth in all key markets, Aegon expects to increase free cash flows to 800 million euros by 2025. As FCF swells, there is a strong case for an increase in dividends. At the same time, Aegon has been guided to reduce gross financial leverage to 5 billion euros by 2025. Improvement in credit metrics is likely to support stock upside. I would, therefore, expect healthy total returns from AEG stock in the next 24 to 36 months. This also makes it one of those under-$10 stocks to consider.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
