Interest rates and bond yields are rising, making dividend stocks less enticing, since investors can earn high returns without having to buy income-producing stocks. But the good news is that this has led to many dividend stocks trading lower lately, pushing their yields higher in the process and potentially setting them up for big gains later on.
Three excellent dividend stocks that are absurdly cheap right now and that are trading below $100 include AT&T (NYSE:T), Pfizer (NYSE:PFE), and Zoetis (NYSE:ZTS). Here’s why they can be excellent options for income investors to consider for their portfolios right now.
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AT&T
AT&T’s business has been doing well this year, but there simply hasn’t been a huge catalyst to make the telecom stock a hot buy. Investors are going elsewhere for high returns, and there are also concerns that Space Exploration Technologies Corp plans to turn Starlink into a major U.S. carrier, potentially disrupting the entire telecom industry.
Those worries have been weighing on AT&T’s stock, which is down about 16% this year. Even the company’s recent earnings report, as strong as it was, wasn’t enough to turn its fortunes around. AT&T posted more than 5% revenue growth in the September quarter, a far higher rate than usual, which should have given investors renewed confidence in the business. But that hasn’t been the case, at least for now.
The stock is trading around $21 right now, and its price-to-earnings (P/E) multiple of 11 is incredibly low. The S&P 500 average is much higher at 23. AT&T’s stock also yields 5.3%, providing investors with an extra incentive to buy it today, as it’s not only cheap with significant upside potential but also offers high recurring income.
Pfizer
Pfizer’s stock has actually been doing well this year, a nice change from previous years when investors remained cautious despite its posting steady, strong results. But even at around $30, this is an undervalued stock.
The healthcare company has been investing in its growth over the years, and while it may take some time for those efforts to translate into stronger top-line growth, the market has been overly punitive, with Pfizer shares down more than 30% over five years.
Its P/E multiple of 39 looks high, but Pfizer has also been incurring nonrecurring expenses as it restructures its operations and aims to get leaner and more efficient. Based on analyst expectations of future earnings, its forward P/E multiple is incredibly low, at just 10. And at 5.8%, it offers an even higher yield than AT&T.
