As we edge into the second half of 2024, the landscape for dividend stocks seems promising. The anticipated decrease in interest rates highlights the resurgence of dividends as an attractive investment option. In this article, we will delve into three dividend stocks that are currently trading at very reasonable prices, making them intriguing prospects for investors.
Rising dividends
- Shell (LSE: SHEL) is a prominent oil giant that presents an interesting opportunity with a low price-to-earnings (P/E) ratio of 8.5, undercutting the market average of 13.6.
- The current yield of around 4.1% may not be the highest, but its strong dividend coverage indicates a secure payout and potential for future increases.
- Analysts foresee a 5.5% upward trajectory in the dividend payout, edging the yield up to approximately 4.3%, potentially surpassing savings account interest rates if they dip a few percentage points.
- Despite challenges in transitioning to clean energy and ESG stock preferences by investors, Shell could still thrive considering its modest P/E ratio. If oil prices remain stable, the stock is poised for growth in the coming years.
High yields
- HSBC (LSE: HSBA), a banking giant, boasts an attractive P/E ratio of seven.
- With an appealing dividend yield around 7%, disregarding the special dividend for this year, HSBC stands out in a low-interest-rate environment. Furthermore, its healthy dividend coverage suggests a low risk of a dividend cut.
- Although declining rates pose a threat to its profitability, as well as the economic climate in China where HSBC has significant investments, the 7% dividend makes it a compelling choice. Such a substantial yield from a reliable blue-chip firm like HSBC is truly remarkable.
Attractive total returns
- Keller Group (LSE: KLR), a FTSE 250 engineering company, offers an enticing opportunity with a P/E ratio of approximately 8.1.
- Despite a current dividend yield of 3.8%, which isn’t exceptional, Keller’s strength lies in its niche expertise in ground preparation for construction projects, particularly in the thriving US market.
- Recent reports of exceeding expected results in the US have led to optimism among brokers, prompting a surge in price targets. The company’s potential for substantial total returns, combining gains and dividends, looks promising.
- The primary risk with Keller involves an economic downturn affecting the construction sector. However, with the US government investing heavily in infrastructure, Keller appears well-positioned to navigate any potential slowdowns.
In conclusion, these three undervalued dividend stocks present compelling investment opportunities as we progress through the latter half of 2024. The combination of attractive dividend yields, robust dividend coverage, and growth potential makes them worthy contenders for investors seeking promising returns in the coming years.
