There are currently numerous dividend stocks available at attractive prices. But given the bleak economic outlook, I’m sometimes tempted to sit back and wait before adding more to my portfolio.
Part of my caution comes from Harry Dent, a financial strategist. In October 2023, he told ThinkAdvisor that he expected a market correction in 2024. He said: “People think I’m crazy when I say the stock market will drop 86% against the S&P – the worst case, but also my most likely case.”
However, Dent’s view makes him an outlier.
A recent survey found that only two out of twelve analysts think this is the case S&P 500 will decrease in 2024. The most pessimistic assumes a decline of 8.5% from the closing price on December 1, 2023.
But the truth is that no one knows how the stock market will perform in 2024. This means that there is little point in making predictions.
A more productive use of time
Instead, I think my time would be better spent looking for undervalued dividend stocks.
If a market crash were to occur, the returns on these securities would continue to rise. But I’ve learned to my cost that delaying investments in the hope that better opportunities arise isn’t necessarily a good strategy.
Assuming that most investors behave rationally, a stock that is truly a bargain will soon stand out and drive up its price. Indecision and delay have been described as causes of failure.
Here are three FTSE 100 Dividend stocks that seem cheap to me at the moment.
Compared to 2019-22 average Taylor Wimpey predicts that 24% fewer homes will be built in 2023. And although a recovery in the property market is not guaranteed, directors showed their confidence in the future by increasing the interim dividend. If it pays the same as it did in 2022, its shares currently yield about 7%. Fortunately, the company has a strong balance sheet and plenty of building land.
In the last six years Vodafone maintained its payout of 9 cents per share. Due to stagnant sales and falling profits, most analysts expect a cut for the fiscal year ending March 31, 2024 – the average forecast is 7.29 euro cents. And some are worried about the enormous debt. But the company has agreed to sell its operations in Spain. This will raise more than €4 billion in cash, providing additional leeway if needed. The stock currently has a yield of over 10%, which makes it particularly attractive.
National Network is a stock that keeps on giving – it last cut its dividend in 1996. It increased its interim distribution by 8.7% for the 2024 financial year. Repeating this for the final dividend gives a current yield of 5.8%. Not bad for a stock that enjoys monopoly status in its key markets. However, in order to meet regulatory requirements, significant investments will need to be made in infrastructure over the next few years. Still, the company forecasts annual earnings growth of 6-8% through at least 2026.
Unfortunately, this is a rather theoretical exercise as I don’t have any cash left at the moment. But as my situation changes, I’ll start looking for cheap dividend stocks, regardless of how the broader market is likely to perform.
The post “Don’t worry about a stock market crash, I’d buy cheap dividend stocks now” appeared first on The Motley Fool Germany.
James Beard has held positions at National Grid Plc and Vodafone Group Public. The Motley Fool UK recommended Vodafone Group Public. The views on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2023