With the markets down significantly from the all-time highs of just a few months ago, it's a great time to be on the lookout for bargains. For dividend investors, several stocks look like excellent buying opportunities amid the recent market weakness, and they range from the strong and stable to the speculative.
Here are three dividend stocks our experts feel especially confident about this month.
General Motors (NYSE:GM) has come a long way from its 2009 bankruptcy filing, and it appears to have more improvement ahead. A sweeping overhaul of GM's expensive and inefficient product-development process a few years back has allowed the company to save $1 billion per year and produce vehicles that rival Toyota Motor's offerings in quality(NYSE:TM).
CEO Mary Barra has laid out some bold goals, such as hiking GM's adjusted pre-tax profit margin, which was recently 5.8%, to between 9% and 10% by "early next decade." The company is boosting profitability in part by shutting down or downsizing less lucrative operations in regions such as Russia, Indonesia, Thailand, and Australia. Meanwhile, it's investing more in areas including China, where GM and its Chinese partners plan to spend $14 billion between 2014 and 2018, opening five new factories and introducing 60 new or refreshed models. Although sales have recently been flat in China despite price cuts, GM's June sales surged 15% in Canada and 4% in the U.S. on a year-over-year basis. China represents a long-term growth opportunity, and strength in GM's traditional markets is helping to make up for lackluster short-term results elsewhere.
General Motors is also spending $12 billion developing its Cadillac brand and hopes to nearly double Cadillac sales between 2014 and 2020. GM is investing heavily in R&D, too, focusing on advances in weight reduction and fuel economy. Other growth catalysts include a completely revamped Chevy Malibu family sedan, a booming SUV division, and a rebuilt financing arm, General Motors Finance Company.
GM's dividend, which was raised by 20% earlier this year, recently yielded a hefty 4.2%. Income-seeking investors can collect significant dividends from GM each quarter while reasonably expecting solid stock-price appreciation, too.
It can afford this substantial payout because its fundamentals are solid, particularly considering the current low-interest-rate environment. In Q1, core loans rose 7% year over year, while total average deposits advanced 9% to $1.2 trillion. The bottom line was down slightly, but revenue rose 3% to $21 billion. Net charge-offs declined to 0.3% of total loans from 0.4% in Q1 2014.
More encouragingly, the company is making a new push in the area where it has been No. 1 over the past few years: mortgage lending. This past April it bought a portfolio of commercial loans totaling around $9 billion from the finance arm of General Electric. That has padded the company's considerable lead and deepened its involvement in promising segments such as manufactured-home communities.
Meanwhile, the Federal Reserve is widely expected to raise its key interest rate in the near future. This will benefit Wells Fargo in numerous ways -- namely, by widening the spread between what it earns in loans and what it pays out in deposits and CDs.
Wells is a winner, and it's sure to continue rewarding its stockholders for sharing in the victory.
My favorite dividend stock for July is Wynn Resorts (NASDAQ:WYNN). While it may sound counterintuitive to buy a dividend stock whose dividend was recently cut, I believe Wynn is still worth a look.
For starters, the stock is cheap right now. Shares have lost nearly 50% of their value over the past year, mainly thanks to a slowdown in Macau, where Wynn derives the majority of its revenue. Gaming revenue from Macau is down 36.6% year over year, and the VIP segment of the market -- which is Wynn's bread and butter -- is performing even worse.
As far as the dividend cut is concerned, I don't see it as a cause for alarm, but rather as Wynn's choice to use its capital wisely. Wynn is currently investing in its largest project to date: the Wynn Palace in Macau, which is to be a 1,700-room, $4.1 billion luxury casino resort. The Wynn Palace will be well positioned to capitalize on the Macau turnaround that's expected to take place in the coming years. In fact, UBS just upgraded its outlook for Macau from "cautious" to "constructive," mainly on the news that the Chinese government is easing visitation restrictions for mainland residents.
CEO Steve Wynn made it clear to investors that he would rather keep a strong balance sheet than borrow money to pay a strong dividend, and I feel investors should applaud this move, especially while the company is putting so much of its capital into new projects. Wynn Resorts has an excellent record of generous distributions to shareholders, and in fact it has paid special dividends on top of its normal payouts in all but one year since 2006. With the company investing billions into ambitious new projects over the next several years, I believe patient shareholders could be handsomely rewarded once again.