It’s not easy to hunt for bargains in a stock market that has soared higher over the past two years. However, it’s not impossible if you’re willing to be a little creative. There’s always a deal somewhere; Blue chip stocks with temporary bumps and bruises can be great places for long-term investors looking for a deal.
Great dividend stocks can be viewed through this lens Real estate income(NYSE:O), Hershey(NYSE:HSY)And UnitedHealth Group(NYSE: UNH) stand out as attractive purchases worth investing in today. Here’s what makes these stocks worthy of your investment dollars right now.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
Realty Income is a real estate investment trust (REIT), a company that acquires and leases real estate. In recent years, high interest rates have hurt Realty Income and other REITs (and their stock prices) because they often borrow to finance new real estate deals that grow their businesses. Now that the Fed has made its first rate cut, Realty Income is ready to enjoy a friendlier business environment where debt is cheaper.
According to REITs, Realty Income is one of the best. It manages a portfolio of 15,540 properties leased to single-tenant businesses, such as supermarkets, dollar and convenience stores, restaurants and other places where consumers routinely spend money. Realty Income distributes most of its profits to shareholders, making it an excellent dividend stock.
The company has increased its dividend annually since its IPO, a streak of 31 consecutive years. Realty Income still yields 5.2% at its current price, an attractive figure for most income-oriented investors. The company is growing at a low single-digit rate, which should continue funding increases. The stock is still nearly 25% off its all-time high, but that gap could be closed if rates continue to fall. Consider buying the stock before that happens.
Some business models are sweeter than others, and the confectionery industry has traditionally been quite lucrative. Hershey is a dominant player in the US market, where brands such as Hershey’s, Reese’s, Jolly Rancher, Almond Joy and a number of others have made Hershey a market-beating stock over its lifespan. In addition, the company has expanded into the snack segment with Pirate’s Booty, Skinny Pop and Dot’s Pretzels.
However, Hershey faces catastrophic farming conditions for cocoa, a key ingredient for many of its products. Rising cocoa prices have put pressure on Hershey’s business, and earnings growth estimates have taken a big hit, weighing on the stock price. The stock has fallen so much that Hershey’s dividend yields almost 3%, which has only happened a few times since the 1980s.
The stock could be a great buy if you think Hershey will adapt to these challenges. The stock has averaged a price-to-earnings (P/E) ratio of almost 28 over the past decade, but today trades at a P/E of just 19. Hershey is remarkably profitable, generating a fantastic return of 21 over the past three years % on invested capital, even with the company’s problems. Hershey will likely shine again once its cocoa woes are behind it, making this a broken stock, but not a broken company.
Healthcare is a billion-dollar industry in the US, and UnitedHealth Group has its fingerprints all over it. The company operates two huge business units. UnitedHealth provides health insurance benefits through government and corporate programs to more than 148 million people. The Optum segment is home to three businesses: patient care services, vendor technology services, and pharmacy supply chains. The company generates annual revenues of more than $389 billion.
UnitedHealth Group is going bankrupt after the company’s initial expectations for next year disappointed investors. It’s not a big dip, not even 10% above its peak. Still, the stock here is quite attractive. The stock trades at a price-to-earnings ratio of 20, and analysts expect the company to grow earnings at an average annual rate of more than 12% over the next three to five years.
That’s a PEG ratio of just over 1.6, a solid deal for a blue chip company that has increased its dividend by an average of 16% over the past five years. Investors are getting a starting yield of 1.5% today, so don’t hesitate to jump on this dominant healthcare stock and see how your earnings will trend over the next decade and beyond.
Consider the following before purchasing shares in Realty Income:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $813,567!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. TheStock Advisoris on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns October 28, 2024
Justin Pope has positions in Hershey. The Motley Fool holds positions in and recommends Hershey and Realty Income. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
3 Dividend Stocks to Double Now was originally published by The Motley Fool
