Investors searching for the next great investment idea generally want to spread a wide net. If they’re interested in dividend stocks, the price might not be as important as the payment’s yield or growth. Some investors do like the idea of investing in low-priced stocks. With that in mind, it’s worth trying to find dividend stocks that also aren’t too expensive — we’ll be looking at the best dividend stocks under $25.
These two ideas often don’t mix. Well, today, I’ve brought them together for one day only. All seven of these stocks are currently yielding 3.6% or more and trading for less than $25.
Some of them might seem like wild bets in the current environment, but the critical thing to remember is that you’re getting paid to wait for the cloud hanging over the markets to pass. And it always does.
Here are my seven best dividend stocks to buy under $25 for July.
|ARLP||Alliance Resource Partners LP||$20.24|
|OWL||Blue Owl Capital||$9.62|
|ALEX||Alexander & Baldwin||$17.24|
Of the 19 analysts covering JWN stock, only one has a “buy” rating, with five giving it an outright “sell,” including BofA. Almost two-thirds have a “hold” rating on the stock with a median target price of $23. That’s about a 15% upside.
However, down 43% over the past year, it’s currently yielding a healthy 3.7%.
Now, if you’re like BofA, you’re probably betting a recession will cause it to fall further. Well, that could be true, or the recession is so mild it barely knocks Nordstrom off its stride.
The Seattle department store generated $780 million in free cash flow (FCF) over the trailing 12 months. That gives it an FCF yield of 24.5%. I consider anything over 8% to be in value territory.
To be on the safe side, let’s assume that its FCF in 2022 drops by half this amount to $360 million — it was $167 million in fiscal 2021 — it would still be 10%.
Call me contrarian, but I like the risk/reward proposition.
Alliance Resource Partners LP (ARLP)
As Clint Eastwood’s Dirty Harry character said, “a man’s got to know his limitations.” In my case, it’s my relatively limited ability to evaluate anything related to the fossil-fuel industry. I have a hard time getting excited about the business.
However, because I believe sector diversification is good, I’m going with Alliance Resource Partners LP (NASDAQ:ARLP). It currently yields 6.7% — more on this in a minute.
But first, a little about the master limited partnership. It turns out it’s more about coal. It’s said to be the second-largest coal producer in the eastern U.S. It’s got seven underground mines in six states. It also has mineral and royalty interests for 1.5 million acres known for oil and gas production. In addition, it provides terminal services for the transloading of coal.
It’s got its hands in a lot of pies.
In early May, Alliance reported its Q2 2022 results. Revenues were up almost 45% to $461 million due to higher coal volumes and prices, along with higher volumes and prices for its oil & gas interests. This increase led to a 91% jump in distributable cash flow to $85.2 million.
As a result, it raised its quarterly cash distribution by 40% to 35 cents a share.
Interestingly, the company plans to transition out of coal using its Matrix Design Group technology subsidiary to help other companies transition out of fossil fuels. That’s worth keeping an eye on.
Blue Owl Capital (OWL)
Blue Owl Capital (NYSE:OWL) reports its Q2 2022 results in early August. Analysts estimate revenue in the second quarter will be 71% higher than Q2 2021 at $305.9 million. The earnings per share estimate is 12 cents. However, Blue Owl was only formed in May 2021, so there isn’t a comparable number for a year ago.
In December 2021, I included Blue Owl in a group of 10 asset management stocks to own to ride out the omicron variant of Covid-19. Down 35% year-to-date, I didn’t exactly hit a home run on that one, but I do feel it’s a quality business with plenty of potential in 2022 and beyond.
I like the alternatives asset manager because it is making transformative acquisitions to create a global powerhouse in alternatives asset management. In the quarters to come, investors will find out just how transformative.
In the meantime, it pays a healthy 3.8% dividend yield.
Patria Investments (PAX)
For anyone interested in Latin American investments, as I am, Patria Investments (NASDAQ:PAX) ought to be right up your alley.
The Brazilian private equity firm went public in January 2021, selling almost 31 million shares at $17. It used 40% of the proceeds to fund its capital commitments to existing and new funds, 40% for future acquisitions, and 20% for general corporate purposes.
Speaking of acquisitions, Patria announced in June that it would acquire VBI Real Estate, an independent alternative real estate asset manager in Brazil. VBI has approximately 5 billion BRL ($920 million) in assets under management (AUM).
Patria will acquire 50% of the company for an undisclosed amount of cash within two months. It will throw its two existing Brazilian REITs into VBI. It will pay for the 50% in two installments in 2022 and 2023. A third payment could happen between 2024 and 2027 based on VBI’s growth of fee-earning assets. It will pay for the second 50% in cash and stock. It’s expected to close within three years.
Patria has done much work in the 18 months since it went public, adding acquisitions, new funds, and most importantly, fee-earning assets. Patria’s AUM at the end of March was $27.6 billion.
Patria yields a very high 7.1%.
Due to higher prices and more robust demand for its products, Steelcase (NYSE:SCS) reported better-than-expected Q1 2023 results in June. The office furniture maker’s earnings beat came to pass despite higher input costs.
On the top line, the company’s revenue grew 33% over Q1 2022 to $740.7 million. It beat the estimate by about $50 million. On the bottom line, Steelcase’s adjusted loss was 5 cents a share, 13 cents better than the consensus.
Revenues in all three operating regions grew by double digits during the quarter, including a 38% increase from the Americas, its largest market. At the end of May, the company’s backlog was approximately $927 million, 52% higher than a year earlier.
In the second quarter, Steelcase expects between $875 million and $900 million, with adjusted earnings per share of 13 cents at the midpoint of its guidance. In Q2 2022, it had an adjusted EPS of 21 cents.
While there is no question that Steelcase’s profitability has deteriorated over the past two to three years, it will get through the hybrid work situation with its business intact. Its balance sheet is healthy, with just $445 million in long-term debt and $116.7 million in cash.
Steelcase last raised its dividend with the July 2021 payment. It now pays out 14.5 cents quarterly, up from 10 cents previously. Its annual payment of 58 cents yields 5.4%.
Pactiv Evergreen (PTVE)
Fast forward to today. The company’s Q1 2022 results included a 28% increase in sales to $1.5 billion due to higher-priced items combined with acquisitions. Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $182 million, 136.4% higher than a year earlier.
PTVE stock is down 27% YTD and 34% since its IPO. As a result, it currently yields 4.4%. That’s plenty to get paid for saving the world with safer packaging.
RBC Capital’s U.S. Equity Strategy Head, Lori Calvasina, believes there’s a 60% chance the U.S. won’t see a recession. For this reason, she considers PTVE is an excellent dividend-paying stock to own for the long haul.
“We may be early in the PTVE turnaround story, and there is still uncertainty on inflation, but we believe there is some conservatism to PTVE’s reaffirmed EBITDA guidance given the strong 1Q, improving labor challenges, and better working capital usage,” Calvasina stated on July 5, according to StockNews.com.
RBC Capital’s Arun Viswanathan is also quoted, saying, “we also find PTVE’s ESG profile attractive (increased fiber-based packaging, 65% recyclable and recycled content moving to 100% by 20230) and like the company-specific restructuring opportunities in Beverage Merchandising.”
By all financial metrics, PTVE is trading lower than it has since it went public 23 months ago. It’s in the right business at the right time. If you buy under $10, you will be rewarded with capital appreciation and dividend income.
Alexander & Baldwin (ALEX)
The history of Alexander & Baldwin (NYSE:ALEX) dates back to 1869 when Samuel Thomas Alexander and Henry Perrine Baldwin partnered to buy 12 acres of land to grow sugarcane. A year later, the duo bought 559 acres for sugarcane growth.
Moving to 1883, the two men formalized their partnership as the Paia Plantation. In June 1900, the company became Alexander & Baldwin Ltd., with assets valued at $1.5 million. By 1911, both men would pass away.
Today, it is Hawaii’s premier commercial real estate owner of 79 properties with 3.9 million square feet of gross leasable area with an annualized base rent per square foot of $27.75.
In Q1 2022, its same-store net operating income grew 18% to $29.8 million. Its core funds from operations (FFO) in the first quarter was $20.8 million, 35.1% higher than a year earlier.
To accelerate its growth, Alexander & Baldwin’s committed $50 to $75 million annually to acquire attractive properties on the various Hawaiian islands.
The July 2022 dividend payment was 20 cents a share, 5.3% higher than its previous payout. Its 80-cent annual payout yields 4.5%.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.