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Which Low-Cost Dividend Stocks Does Wall Street Like the Most?
Stock Analysis & Ideas

Which Low-Cost Dividend Stocks Does Wall Street Like the Most?

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High-yield dividend stocks with low P/E multiples stocks appear to be an intriguing hiding place as the stock market plunges further into a bear market. However, which of the following three high-yield value stocks are viewed most favorably by Wall Street analysts?

The recent market sell-off has caused many investors to steer clear of unprofitable growth companies in favor of their low-growth, dividend-paying counterparts. Undoubtedly, many dividend plays have been faring far better than fast-growers in the market’s latest fall into bear market territory.

While seemingly cheap dividend stocks have been dealt less damage than tech plays, they are not immune from considerable downside as the bear market looks to extend lower.

Unlike the late-2018 Fed-driven market sell-off, inflation is a force that will make the Fed less likely to make a dovish pivot in response to market damage. With a “Fed put” less likely this time around, investors can only wait and see how low markets sink as rates continue on the ascent.

In this piece, we used the TipRanks’ Comparison tool to have a closer look at three cheap — price-to-earnings (P/E) multiples in the single-digits — dividend stocks, to gauge where Wall Street stands after yet another month of extreme selling activity.

Shell (SHEL)

Energy stocks have been in a bull market of their own over the past year, surging higher, even in the face of market-wide panic. The Ukraine-Russia conflict has undoubtedly given big oil firms like Shell a massive boost. Unforeseen peace between Ukraine and Russia could drag oil prices and oil stocks much lower from here. However, the smart money — think Warren Buffett — seems comfortable placing big bets on big oil, even with oil in the $120 per barrel range.

As one of the cheapest major oil and gas firms today, Shell stands out as one of the best ways for late-comers to the energy rally to play the space. Shares of the British energy company slipped into a correction. At writing, the stock trades at 9.85 times trailing earnings multiple, with a 3.5% dividend yield.

Shell took a bit of a hit to the chin when it announced its withdrawal from Russia. As the firm continues to take steps to improve its asset mix while continuing to benefit from higher commodity prices, I think it will be hard to stop the relative underperformer in its tracks.

Chasing momentum in energy isn’t for everyone. Still, the severely-depressed multiples in SHEL stock are hard to ignore for value-focused investors.

Turning to Wall Street, analysts are very bullish with a “Strong Buy” rating and the average Shell price target of $68.43, implying 24.55% upside from today’s levels.

AT&T (T)

With a massive 5.7% dividend yield and a modest 8.2 times trailing earnings multiple, AT&T is an enticing stock for those seeking the perfect mix of value and yield. Though AT&T was forced to reduce its payout following the spin-off of its media assets, the new payout is far more sustainable, even as the lights on the macroeconomy begin to dim.

AT&T is an old-time company that may have a reputation for being a perennial underperformer. The mix of media and telecom proved to be a tricky balance. In the case of AT&T, getting bigger and more diverse did not help result in more sizeable gains.

As a leaner company with a narrower focus and long-term 5G and fiber trends still very much in play, the case for taking a contrarian position in the old-time telecom behemoth has never been greater, especially at rock-bottom multiples.

Now, the U.S. telecom scene is very competitive. With higher interest rates and an economic slowdown likely for 2023, the tides are not in the firm’s favor. And though the post-spin-off version of AT&T is more agile, it’s still a $139 billion company with a lot of bloat that could weigh it down versus its rivals.

Fortunately, AT&T is on the right track, with numerous divestments made in the first half. It’s encouraging that management is taking steps to better itself. Though the stock may not reflect such positive changes until after macro headwinds dissipate. Such dissipation may not happen for yet another full year.

Wall Street is bullish, with the average AT&T price target of $23.00, suggesting 18.25% upside from current levels.

Intel (INTC)

Finally, we have chip giant Intel, which sports a 3.9% dividend yield and an absurdly-low 6.3 times trailing earnings multiple. Like AT&T, Intel is an old-time company that’s lost its way and has earned a reputation for being a perennial underperformer.

Intel’s rivals have become much stronger recently, and its commanding lead has since diminished. Though the firm has a long-term plan to retake the lead, it’s hard for investors to be nearly as upbeat as its CEO Patrick Gelsinger. Arguably, Intel has a daunting task as it looks to ramp up on R&D to regain its innovative shine.

Looking ahead, many big-tech firms may choose to follow Apple (AAPL)’s lead by creating their own CPUs. Undoubtedly, there are long-lived benefits of cutting Intel out of the equation, especially as the firm plays catch-up.

If Intel can’t leap-frog rivals in the crowded chip space, it may have to resort to discounting. Substantial margin erosion does not bode well for investors eyeing a bottom in a troubled stock under pressure well before the rest of the market sold off.

Wall Street is muted on the name, with the average Intel price target of $51.50, implying 35.78% upside from current levels.

Conclusion

Dividend stocks with low P/E multiples seem like a great place to be in a bear market. However, with a fading macro outlook and idiosyncratic issues to consider, low P/Es aren’t necessarily indicative of undervaluation. At this juncture, Wall Street is most bullish on Shell.

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