Buying dividend stocks that have fallen near their 52-week lows can help maximize the returns you earn on them, while also allowing you to collect a higher yield in the process. And with many stocks struggling in recent weeks, there are some great buys out there today.
Three stocks that are near their lows for the year are Amgen (AMGN 0.19%), Algonquin Power & Utilities (AQN), and Colgate-Palmolive (CL 1.27%). And they're all paying well above the S&P 500 average yield, which is now less than 1.3%.
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1. Amgen
Drugmaker Amgen has historically been a good business to invest in; in each of the past five years, its operating margin has been at least 35% of revenue. Although it's not a fast-growing business with revenue rising just 11% from 2016 to 2020, it still makes for a strong company to invest in.
Even amid challenges during the COVID-19 pandemic, with hospitals deferring procedures and fewer in-person visits to the doctor (and thus, fewer prescriptions), the business has remained profitable over the past 12 months. Amgen's diluted per-share profit of $9.84 over the past year is strong enough to support its dividend, which totals $7.04, putting it at a payout ratio of around 70%. It's a good sign of stability that even under less-than-ideal circumstances the company is still doing well.
Shares of Amgen haven't been trading this low since April 2020. And with the drop in price (which is likely because investors have been gravitating toward higher growth stocks), its yield is now up to 3.3%. And it's possible for investors to earn even more over time -- Amgen is a generous company when it comes to dividends. It has increased them by 76% in just five years.
2. Algonquin Power & Utilities
Algonquin is another strong stock to buy if you're a dividend investor. The renewable energy and utility company serves more than 1 million customers in North America. With wind, solar, and hydroelectric utilities in its portfolio, the company is in an excellent position to grow over time as the demand for renewable energy continues to rise. Its financials are also sound; Algonquin's operating margin of 20% or better over the past five years has allowed the business to easily post a profit during that time.
But despite its terrific track record, the stock is trading around its 52-week lows. Opportunistic investors should take advantage as Algonquin now pays a yield of 4.6% -- the highest on this list. And that, too, is growing; earlier this year, the company announced a 10% increase to its payout. Its modest payout ratio of just 41% also leaves plenty of room for more dividend increases in the future.
If you want a good, boring dividend stock to own, Algonquin is an excellent buy-and-forget option.
3. Colgate-Palmolive
Colgate-Palmolive is a yet another stable business that pays an above-average yield. The company sells many consumer products all over the world. Whether it's dish soap, toothpaste, or deodorant, odds are several of its products are likely in your home right now. It and other businesses that focus on essentials were popular buys for investors worried about the pandemic. Late last year, shares of Colgate-Palmolive hit more than $86. Today, they're down to around $75 as the stock has fallen out of favor with investors who are moving on to "recovery stocks."
But the decline in price isn't reflective of the stability of the business. Colgate-Palmolive has consistently earned an operating margin of at least 23% in the past five years, not missing a beat last year. Sales of $16.5 billion definitely got an uptick in 2020 with pandemic-induced buying habits -- they rose by 5%, which is uncharacteristically high for the company; from 2016 to 2019, a span of three years, the top line only grew by 3.3%.
The company does expect net sales for this year to rise between 4% and 7%, but I would be cautious of expecting too much from the business as there could very well be a slowdown as consumers start to move away from loading up on essential day-to-day products. One thing investors can likely count on is its solid dividend. Colgate-Palmolive currently yields 2.4% and it is the only stock on this list that is a Dividend King, having raised its payouts for more than 50 years in a row.
With its solid track record and the company still enjoying a sustainable payout ratio of 61%, this is a top dividend stock you can just buy and forget about.
