Dividend stocks can be great buys, especially when they're trading near their 52-week lows and their businesses are still in solid shape. In the current bear market, investors have been fearful of investing, even in quality stocks. But that can be your opportunity to take advantage of some great opportunities.
Medtronic (MDT -1.22%), Southern Company (SO -0.91%), and Public Storage (PSA -1.33%) are three stocks that yield more than the S&P 500 average of 1.7%, and they are trading near their lows. Here's why you should consider buying shares of these businesses today.
1. Medtronic
Medtronic is one of the world's top medical device makers, producing insulin pumps, cardiac monitors, and many other devices. However, it has been struggling to generate growth of late due to the disruption that the pandemic has caused hospitals. When the company reported its latest earnings numbers on Nov. 22, sales of $7.6 billion for the period ended Oct. 28 were down 3% year over year. While the company did suffer a negative $457 million impact due to foreign currency, it also blamed the poor performance on "lower than anticipated underlying market procedure volumes in certain businesses."
However, these are problems that are transient in nature, and if you're planning to buy and hold a dividend stock for years, they shouldn't deter you from buying Medtronic's stock. While the recent results may be a bit disappointing, the healthcare company is likely to rebound. And its operating cash flow over the past six months is just over $2 billion, which is more than the $1.8 billion it paid out in dividends during that time.
With the stock trading at its 52-week low right now, Medtronic could make for a good contrarian pick right now, particularly for dividend investors. The stock pays a yield of 3.4%, and at a forward price-to-earnings (P/E) multiple of 15 (based on analyst forecasts), there's some risk already priced into the investment as the average stock on the S&P 500 trades at nearly 18 times its future expected profits.
2. Southern Company
Southern Company is a utility company serving around 9 million customers throughout the U.S. By providing customers with essential services, Southern is a business that will benefit from a recurring customer base and a good deal of consistency. And that can be tremendously valuable for dividend investors who primarily invest for the payout.
In its most recent quarter, for the period ended Sept. 30, Southern reported a net income of $1.5 billion, which was a year-over-year increase of 34% as it benefited from increased usage and higher prices. CEO Thomas A. Fanning stated, "The economies within our service territories remain strong, and customer growth outpaced our expectations." At 0.8%, the increase in the number of customers from the prior-year period wasn't huge for Southern, but it's a positive sign nonetheless.
Southern's 4.1% dividend yield is the highest on this list, and with the stock not trading far from its 52-week low of $60.71, now could be an optimal time to buy shares of the company. At a forward P/E of 18, its valuation is in line with the S&P average.
3. Public Storage
The lowest yield on this list comes from self-storage company Public Storage. Like the utility business, this is a company that banks on recurring revenue since customers aren't likely going to be putting things in storage for just a month or two. Public Storage is the largest self-storage company in the world and has locations in the U.S. and Europe. The company's net rentable square footage tops 170 million.
This real estate investment trust (REIT) grows by adding to its portfolio. Late last year, it acquired All Storage for $1.5 billion in a move that would add 56 self-storage properties to the company's portfolio, including many "prominent locations in new, high-growth submarkets in addition to complementary locations in Public Storage's existing submarkets," according to the company.
In the REIT's most recent quarterly report, its revenue rose 22% year over year to $1.1 billion. For the full year, it projects that its same-store revenue will grow between 13.5% and 15%, while same-store net operating income will rise between 15.4% and 18%.
Although Public Storage's 2.7% yield is the lowest on this list, the company's growth opportunities could make up for that, especially if consumers need to downsize and put things into storage amid a recession next year. Public Storage's stock is less than 10% away from its 52-week low of $270.73, and its forward P/E of 26 may seem a bit high. However, given its strong growth, that multiple could quickly come down in the future, so the valuation shouldn't deter you from what still looks to be a great long-term buy.
