3 Dividend-Yielding Stocks Too Cheap to Pass Up

September 20, 2024 at 08:38 AM EDT

Dividend Yield

With the Federal Reserve kickstarting a new rate-cutting cycle, dividend stocks have become even more attractive. On Wednesday, the Fed made a hefty 50 basis points cut, surprising many who had anticipated a more modest 25 basis point reduction. As rates drop, dividend-paying stocks become more appealing to income-focused investors. With yields offering solid returns in a low-interest environment, investors may now flock to dividend stocks with above-average yields. Here's a look at three high-yielding dividend stocks that are too cheap to ignore.

AT&T Offers a Strong 5.2% Dividend Yield for Income Investors

AT&T Inc. (NYSE: T) is a telecommunications behemoth, ranked the largest globally by revenue and the third-largest operator of mobile communications in the U.S. AT&T operates through two primary segments, including AT&T Communications and AT&T Latin America, providing an array of telecommunications, media, and technical services worldwide.

Despite industry challenges, AT&T has impressed investors this year, with its stock up an impressive 27.2%, outperforming the broader market. This stock's hefty dividend yield of 5.2% makes it even more attractive. This combination of share price appreciation and a high yield results in solid overall returns for investors.

Moreover, AT&T appears undervalued with a P/E ratio of just 11.48, placing it firmly in value territory. While the company faces modest earnings and revenue growth expectations, analysts still see potential, with a consensus price target of $22.31. This suggests a further 5% upside on top of its already appealing yield.

ARCC’s 9.25% Dividend Yield Paired With Attractive Valuation

Ares Capital Corporation (NYSE: ARCC) is a specialty finance company providing customized financing solutions for small and mid-sized businesses. ARCC focuses on industries such as software, healthcare services, and diversified financials, offering everything from senior secured debt to equity capital. The company generates current income and capital appreciation through its diversified debt and equity investments, aiming for risk-adjusted returns throughout different economic cycles.

While ARCC’s YTD performance has been modest, with just over a 3% gain, its dividend yield stands out. With an immense 9.25% yield, the stock offers one of the highest returns among its peers, pairing well with an annualized 3-year dividend growth rate of 6.27%. ARCC also maintains a strong payout ratio of 65.75%, signaling sustainability in its high payouts.

Additionally, ARCC has an attractive valuation with a P/E of just 7.11, making it an enticing option for value-seeking income investors. Analysts remain bullish on the stock, giving it a Moderate Buy rating and projecting a 5% upside. If ARCC breaks through its long-standing resistance levels around $21.50 to $22.00, investors may also see capital appreciation, potentially adding another layer of returns on top of the high yield.

VICI Properties: Strong Earnings Growth and 5.06% Dividend Yield

VICI Properties (NYSE: VICI) is a real estate investment trust (REIT) specializing in owning, acquiring, and developing gaming, hospitality, and entertainment properties. As a leading player in this niche real estate space, VICI has shown robust financial performance, consistently growing its revenue and maintaining net margins of around 45%.

The company continues to impress investors with its ability to deliver earnings growth. Most recently, VICI reported earnings per share of $0.71, beating estimates of $0.67, and revenue of $957 million, slightly surpassing expectations.

Despite its strong performance, VICI remains fairly valued, with a P/E of 12.97 and a dividend yield of 5.06%. The stock has recently pulled back more than 4% from its 52-week highs, presenting an attractive entry point for investors looking for income and value. VICI is currently in an uptrend after breaking above its 200-day moving average in July, and with momentum building, the stock is up almost 3% YTD, making it a strong candidate for long-term growth and income.

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3 Dividend-Yielding Stocks Too Cheap to Pass Up

AT&T Offers a Strong 5.2% Dividend Yield for Income Investors

ARCC’s 9.25% Dividend Yield Paired With Attractive Valuation

VICI Properties: Strong Earnings Growth and 5.06% Dividend Yield

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