Investors are chasing yields in this low-rate environment, and that has helped make many dividend-paying stocks expensive. Thankfully there are still a few bargains to be had out there.
AT&T (T -1.37%), Camping World (CWH -7.43%), and Southern Copper (SCCO 2.37%) are all yielding better than 5% right now. They are at different stages of growth, but one thing that they have in common is that they're all cheap right now. Let's take a closer look at all three of these attractively priced high-yielding stocks.
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AT&T
It's fair to say that last year wasn't a good one for AT&T shareholders. The telco giant delivered a negative return of 8%, and that includes the chunky quarterly distributions. Investors stayed away from wireless carriers in general, but AT&T also got whacked when it made the unpopular decision to spin off WarnerMedia later this year.
This year is off to an encouraging start, and not just because the stock is one of the market leaders -- up 10% through Wednesday's close in an initially down market year. Market sentiment is starting to shift back to the telcos it abandoned in 2021. Earlier this week, Citi analyst Michael Rollins added AT&T to his firm's "positive catalyst" watch list. The words "positive" and "catalyst" have been rarely used to describe AT&T these days, but it's happening now.
Rollins feels that expectations will rise for net additions into the company's postpaid wireless business. He also expects the valuation gap to close between AT&T and rival Verizon (VZ -0.68%) once the WarnerMedia divestiture is completed later this year, and that brings us to valuation. Verizon is cheap at 10 times forward earnings, but AT&T is even cheaper at a multiple of 8 times this new year's expected net income. AT&T's current yield of 7.9% will be whittled down closer to 5% once the WarnerMedia spin-off closes, but there's still plenty of upside here if the market warms up to the leaner and cheaper AT&T.
Camping World
Unlike AT&T, Camping World had a great 2021 for investors. The stock returned 66% last year, popping a stunning 11-fold since bottoming out in the initial pandemic-related sell-off. Folks apparently want recreational vehicles (RVs) in the new normal, especially as a safe way to travel across the country in this era of social distancing and enjoying the great outdoors.
Camping World has now pulled off five quarters of double-digit revenue growth, and that includes a 14% year-over-year uptick on the top line -- and a 22% surge in net income -- in its latest report. You would think that an 11-bagger over the past 22 months would be outrageously priced, but Camping World stock can be had right now for just 6 times trailing or forward earnings.
Camping World is making the most of its newfound wealth. It's returning money to its shareholders through buybacks and cash distributions. It recently doubled its quarterly dividend, and it now yields 5.3%. It also declared larger special dividends twice over the past five years.
The knock on Camping World despite its mid-single-digit earnings multiple and dividend yield is that this is a cyclical business. However, we haven't lost our love for gas-guzzling RVs despite rising prices at the pump and an iffy economy. Camping World continues to thrive, helping consolidate a fragmented industry to dominate this market. It's a cheap stock with a chunky yield, and its growth arc may not be peaking anytime soon.
Southern Copper
Copper prices have more than doubled since bottoming out when the pandemic began. Copper is naturally an important component in the housing boom with its applications in plumbing and wiring. Copper is also playing a pivotal role in renewable energy and electric vehicles, which require three to four times the amount of copper as gas-powered cars.
Southern Copper is not the largest of copper stocks, but its rapidly growing dividend is making it a way for yield-chasing investors to cash in on the metal's revolution. Southern Copper shares its good fortune with its investors, making them direct and indirect beneficiaries of the copper boom.
Southern Copper was paying $0.40 a share every quarter until the pandemic threw a wrench in the plans of copper miners. Southern Copper would go on to slash its disbursement in half the following quarter, and it's been uphill ever since.
- Q1 2020: $0.40 per share dividend
- Q2 2020: $0.20
- Q3 2020: $0.40
- Q4 2020: $0.50
- Q1 2021: $0.60
- Q2 2021: $0.70
- Q3 2021: $0.90
- Q4 2021: $1.00
The latest hike finds Southern Copper yielding 6.1%. Naturally the payouts can drop as quickly as they have risen if copper prices fall, eating into Southern Copper's profitability. For now, momentum is encouraging. Analyst profit targets for 2022 have risen from $3.66 to $4.38 per share. A commodity stock fetching 16 times forward earnings isn't necessarily textbook cheap, but with so many ascending industries leaning on copper, the upside is still substantial at this point.
