With so much volatility currently in the stock market, many investors are drifting toward dividend stocks as a source of income during these less-than-ideal economic conditions. Dividends can play a significant role in an investor's portfolio at any time, but especially during down periods like we're currently experiencing. Here are three incredibly cheap dividend stocks you should consider.
1. Altria Group
Few companies can say they have a single brand as iconic as Altria's (NYSE: MO) Marlboro cigarettes, which account for around 40% of the U.S. cigarette market. In the past five years, Altria's stock has plunged more than 35%, but realistically, investors don't gravitate to Altria expecting above-average stock price growth -- it's all about the dividend.
The company aims to pay out around 80% of its adjusted earnings per share in dividends, and its current yearly dividend is $3.76 per share.
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Altria has undoubtedly had some recent missteps, such as the failed Juul experiment and the regrettable stake it took in cannabis company Cronos Group(NASDAQ: CRON) (on which it's taking a $483 million capital loss). But these missteps may be the catalyst the company needed to refocus and get back to its core moneymaker, cigarettes. At least in the near future, anyway.
As smoking rates fall in the U.S., Altria has been trying to slowly-but-surely transition into its "moving beyond smoking" phase, but the success of this campaign won't be known for quite some time. In the meantime, investors can lean on Altria's dividend, which has proven to be one of the more lucrative and reliable in the stock market.
2. Bank of America
After a rough first half of 2022, Bank of America(NYSE: BAC) outperformed the general banking sector in the back half of the year, which is a positive sign for investors going forward in 2023. As macroeconomic conditions weigh down most companies' balance sheets, it's been a plus for banking stocks like Bank of America.
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In its 2022 third quarter, Bank of America made $24.5 billion in revenue, but more notably is where most of it came from: interest income. The bank made $13.8 billion from interest payments (up 24% year over year), and as the Federal Reserve continues to raise interest rates in the foreseeable future, this will likely continue to increase. Bank of America estimates an extra $4.2 billion in income for every 100-basis-point (1%) increase in interest rates.
It also helps that loan activity remains strong for the bank, up 11% year over year. The stock likely already has bad economic conditions priced into it, so it's a good chance it will see growth before the broader economy does. As a blue chip banking stock, Bank of America is a great long-term play to have in your portfolio -- especially as it hovers around the low $30 range.
Bank of America's quarterly dividend is currently $0.22 per share.
3. Coca-Cola
I mentioned earlier that few companies have brands as iconic as Altria's Marlboro, but Coca-Cola's (NYSE: KO) flagship soda is undoubtedly one of them. Up over 3% in the past 12 months, Coca-Cola is one of the few S&P 500 companies that made it through 2022 relatively unscathed.
With brands that include its flagship soda, Sprite, Minute Maid, Topo-Chico, Simply, Powerade, and many more, Coca-Cola's portfolio is a prime moneymaker. In its 2022 Q3, Coca-Cola made $11.1 billion in revenue, up 10% year over year, more than it anticipated.
Sodas are Coca-Cola's bread and butter, but the company's willingness to invest in emerging categories (such as hard seltzers) makes it a great investment now and going forward.
Having increased its yearly dividend for 60 consecutive years, Coca-Cola is a certified Dividend King (companies that have increased their dividend for at least 50 consecutive years). Its current quarterly dividend is $0.44 per share, and its trailing annual dividend yield -- the average dividend yield over the previous 12 months -- is around 2.8%.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
