On the search for high-quality stocks at low prices? Consider taking a look at dividend stocks at a 52-week low. Sure, at first, you may find it to be a red flag that a particular stock is trending lower at a time when the Dow Jones Industrial Average is hitting new highs and the broad market is trending higher.
Yet, while plenty of stocks hitting new lows are doing so for a good reason, this is not universal. Plenty of them have been knocked lower, due to the market overreacting to negative company-specific developments. In time, these issues could prove temporary.
Not only that, but you can collect steady, average or even above-average dividend yields while you wait for the recovery to take shape. In some situations, the upside potential could be enormous.
Taking a look at dividend stocks that have recently hit new 52-week lows, these seven stand out as stocks to buy this month.
Cisco Systems (CSCO)
Compared to other big tech stocks, Cisco Systems (NASDAQ:CSCO) has so far not received much, if any, boost from the generative artificial intelligence (AI) growth trend. As a result, shares in the tech hardware giant have traded sideways. That’s not to say that Cisco has let the gen AI trend pass it by.
The company recently closed on its acquisition of software company Splunk. For now, investors are taking a wait-and-see approach with CSCO stock. That’s mostly due to uncertainty over whether this will produce the sort of AI-related growth synergies touted by management at the time of the deal close.
Still, with this uncertainty comes the opportunity to scoop up shares at a relatively low price. CSCO currently trades for only 13 times forward earnings and has a forward dividend yield of 3.32%. Over the past 13 years, Cisco’s quarterly payouts have steadily increased.
CVS Health (CVS)
It makes perfect sense why the market is currently avoiding CVS Health (NYSE:CVS) stock in droves. The pharmacy and health insurance company recently delivered a very downbeat quarterly earnings report.
The company’s revenue and earnings last quarter fall short of expectations. Guidance for the full-year was revised downward. To make matters worse, just a few weeks after dropping the negatively received earnings report, CVS management stated at an investor conference that the company could lose up to 10% of its Medicare customers next year.
All of that explains why CVS stock has fallen by double-digits so far this month. It also underscores that a CVS turnaround may take several years to take shape. However, for patient contrarian investors, buying now could prove profitable in hindsight. Shares sell at a dirt-cheap 8.05 times forward earnings, and the stock has a well-covered 4.61% forward dividend yield.
Information Services Group (III)
In contrast to the two well-known dividend stocks at a 52-week low, Information Services Group (NASDAQ:III) is a fairly obscure micro-cap stock. Based in Stamford, Connecticut, III provides digital transformation services.
Yes, given several consecutive years of declining revenue growth and profitability, it makes sense that III stock has lost nearly two-thirds of its value since late 2021. Yet, despite this streak of poor fiscal and stock price performance, things could be turning a corner. At least, that’s the view of Seeking Alpha commentator Fenway Investing.
Last month, the commentator argued that III’s pivot toward recurring revenue products could have a substantial impact on margins and earnings over the next few years. Before the turnaround potentially plays out, investors can profit by collecting the stock’s 5.75% dividend, which was last raised in 2022, and will likely be raised again once earnings bounce back.
Royalty Pharma (RPRX)
Not surprisingly, Royalty Pharma (NASDAQ:RPRX) is in the pharmaceutical royalty business. According to the company, it is the largest buyer of biopharmaceutical royalties. Lately, RPRX has come under pressure, following the company’s latest quarterly results on May 9.
As InvestorPlace reported, the company’s revenue and earnings per share (EPS) figures for the preceding quarter fell short of sell-side expectations. Yet, while RPRX stock may be near not just 52-week lows, but all-time lows, it could end up being a bottom-fisher’s buy in hindsight.
How so? While not certain, it may be factors like high interest rates, as well as uncertainty about future royalty cash flows, affecting RPRX’s performance. If interest rates start moving lower, super-cheap Royalty Pharma, which trades for 9 times forward earnings and has a 3.08% forward dividend yield, could get a re-rating to the upside.
JM Smucker (SJM)
JM Smucker (NYSE:SJM) may be best known for its fruit preserve products, but this purveyor of food and beverages also own brands like Jif, Folger and Carnation. It’s even the parent company of Hostess Brands, the company behind Twinkies and Wonder Bread.
However, there have been concerns that JM Smucker has bit off more than it can chew with the Hostess deal, which closed last year. This, coupled with the impact of inflation on sales growth and earnings, has resulted in poor price performance for SJM stock.
That’s bad news for existing investors, yet for those buying today, this turn of events may work in your favor. Trading for only 11 times forward earnings, SJM could experience a sharp re-rating to the upside if the company is successful in wringing out growth and cost synergies from the Hostess acquisition. SJM, yielding 3.68%, is also a Dividend Aristocrat, with more than 25 years of consecutive dividend growth.
Molson Coors (TAP)
Molson Coors (NYSE:TAP) is a leading brewer. Besides its eponymous Molson and Coors brands, other key brands include Miller and Blue Moon. Admittedly, beer is a slow-growing segment of the overall alcoholic beverage industry.
However, last year, the company benefited from a unique tailwind. The much-publicized boycott of Anheuser-Busch InBev (NYSE:BUD) led to a growth resurgence, as seen in full-year 2023 results. Even so, with the boycott boost viewed as a one-and-done event, investors are waiting for the next wave of growth. The jury’s still out as to when this will happen.
For now, though, you can buy TAP for just under 10 times forward earnings. That’s nearly half of BUD’s forward valuation. TAP shares also sport a 3.12% forward dividend yield. While Molson Coors slashed its dividend during COVID, it has been steadily raising it back up over the past three years.
Toronto-Dominion Bank (TD)
Toronto-Dominion Bank (NYSE:TD), better known as TD Bank, is a leading financial institution in Canada, with a large presence in the U.S. banking market. TD has become one of the dividend stocks at a 52-week low, and not for anything related to macro factors such as high interest rates.
Rather, it’s been regulatory scrutiny over alleged deficiencies in the bank’s anti-money laundering (AML) procedures that has placed pressure on TD stock lately. The bank has already set aside $450 million for fines that will undoubtedly result from this scrutiny, and could ultimately end up being on the hook for a greater amount.
Nevertheless, chances are that shares will recover once this compliance headwind is resolved. In the meantime, TD’s 5.22% forward dividend yield appears secure. The bank has also increased its payout 10 years in a row, by an average of 7% annually over the past five years.
On the date of publication, Thomas Niel 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.
