After this week’s selloff, there are some great dividend-paying companies trading at a discount. Here are five of the best income stocks available today.
The market has been getting hammered this week and it might feel like white-knuckle time for investors. But if you stop and take a deep breath, it can also be buying time.
Scary headlines about Ebola, ISIS, the conflict in Russian and Ukraine, and falling oil prices attract readers and stoke fear among investors. They’re not likely to stop anytime soon.
Consequently, some great stocks in today’s market – particularly dividend payers – have been taking a beating. The key here is that as stock prices fall, dividend yields get juicer. But it’s also important to buy the biggest and best in this volatile environment to give yourself even more downside protection.
Buying up stocks that have been beaten down is a prudent strategy for investors looking for an entry point into some of the best dividend payers in the market.Here are five dividend payers you should be thinking about buying now:
Income Stock No. 1: Airlines
The top pick here is Delta Air Lines, Inc. (NYSE: DAL), which only offers a 1.1% dividend yield. It is worth noting that Delta has been the pioneer when it comes to returning capital to shareholders. But shares are down 16% over the last 30 days.
Delta Air Lines is one of the top stocks in the market when comes to Wall Street expectations. The average analyst price target suggests 55% upside from current levels.
The recent pullback in oil prices is also good news for the airlines. The longer-term trend is in Delta Air Lines’favor, where a rebounding economy and a consolidated industry should help keep prices high for the remaining airline operators.
Income Stock No. 2: Cruise Ships
Carnival Corp. (NYSE: CCL) offers a 2.9% dividend yield and it’s the leading cruise ship operator in the United States. Carnival’s stock has tumbled over 12% for the last month. The Ebola selloff appears to be overshadowing the fact that lower oil prices are also a positive for cruise ship operators.
It’s been a long road in rebranding its Carnival and Costa brands after several incidents, including the grounding of the Costa Concordia. However, cruise ships still offer a compelling value for consumers. And Carnival is also attractively valued, with a P/E-to-expected earnings growth rate (PEG) of just 0.9 — anything below 1.0 is considered a reasonable growth at a reasonable price stock.
Income Stock No. 3: Theme Parks
Six Flags Entertainment Corp. (NYSE: SIX) offers the juiciest dividend yield of the five stocks listed, coming in at 5.4%. It’s also the largest theme park operator in the U.S. Shares of Six Flags are down over 13% over the last three months, compared to the 10% pullback of its top peer Cedar Fair (NYSE: FUN).
Longer-term, Six Flags could utilize a real estate investment trust (REIT) to unlock value for shareholders. REITs pay high dividends and don’t pay income tax. This would be a similar to Cedar Fair, which operates as a master limited partnership (MLP).
Six Flags has a relatively high dividend yield and repurchase program of nearly $500 million, which is good enough to reduce shares outstanding by over 15%. These two things provide solid downside protection, while also giving investors exposure to an industry with high barriers to entry —including finding large enough tracts of land and getting necessary permits.
Income Stock No. 4: Hotels
Starwood Hotels & Resorts Worldwide (NYSE: HOT) offer a 1.9% dividend yield. Starwood manages the Westin, St. Regis, W, Sheraton and a number of other brands. It is one of the best ways to capitalize on a travel boom that’s taking place in Asia. But the stock is down 11% over the last month.
The hotel industry tapered hotel supply during the financial crisis, which means that the remaining hotels will have pricing power as demand increases. The other big benefit from Starwood is that it is looking to sell off assets, effectively getting it out of the hotel ownership. This is a positive and will allow Starwood to focus on its faster growing, more profitable, fee-based business.
Income Stock No. 5: Movie Theatres
Offering a 4.7% dividend yield, Regal Entertainment Group (NYSE: RGC) is an underrated income play in the movie theatre space. Regal operates hundreds of theatres across the U.S. and its shares are down close to 8% for the last month.
Movie theatres are still an easy way for families to enjoy a night out at a relatively cheap price. Regal is also focusing on premium amenities to re-attract interest, including reclining and luxury seats.
Regal remains a cash-flow-generating machine and it appears there’s room to boost its already high dividend over the interim. Its current dividend payment is less than 60% of Regal’s free cash flow.
When investors are trading on fear, it’s a great time to tune out the headlines and focus on your strategy for building long-term wealth. If you liked any of these dividend companies three months ago, you can pick them up at discounted prices today.
Remember your goals and stay the course. You’ll get through this market volatility and come out better for it on the other side.
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