3 insanely cheap dividend stocks


Sometimes stocks get so undervalued or overlooked that investors can find embarrassing good deals simply by taking a long view. Those are the dividend stocks I will point out today, and they come from a wide range of places in the market.

Simon Real Estate Group (NYSE: SPG) is cheap because investors think malls are risky right now, Sands of Las Vegas (NYSE: LVS) is undervalued because we don’t know when the entertainment will return, and the wireless giant AT&T (NYSE: T) is not liked because it is in a stagnant business.

Image source: Getty Images.

Shopping malls aren’t as bad as they look

As one of the largest shopping center owners in the world, Simon Property Group was probably one of the hardest hit by closures and reduced economic activity due to the COVID-19 pandemic. There is no doubt that shopping centers have suffered, but they have not been as badly affected as you might think, and their recovery could be relatively quick.

In the third quarter of 2020, management said that the occupancy rate of high-end shopping malls and outlets was 91.4%, slightly lower than the rate of 95.1% at the end of 2019, and the company received 85% of the invoiced net rent, against 72% in the second quarter. Business hasn’t returned to normal, but people are going to malls and shopping at a steady pace this holiday season, and that’s even before any kind of recovery from the pandemic.

On the dividend side, Simon Property Group paid $ 1.30 per share in the third quarter of 2020, up from $ 2.10 in the quarter earlier this year. If we assume that by 2022 the company will return to a quarterly dividend of around $ 2.10 per share, that would add up to a whopping 9.4% to today’s share price. I think it’s plausible if there is an economic recovery in 2021, given that we have already seen a rapid recovery in net bill payments and a relatively high occupancy rate in Simon Property’s shopping centers. The action looks to be pretty cheap if you’re bullish on the mall’s return, and that’s exactly what I’m seeing happen over the next couple of years.

Bet on a recovery

Few industries have been hit as hard as gaming in 2020, especially in Asia, where COVID-19 restrictions have been more stringent than in the United States. But it’s still one of the best gambling companies in the world given these highly sought-after licenses.

Below, you can see the impact of the pandemic on Las Vegas Sands operations. Revenue has fallen by over 80%, and in Macau and Singapore the business has been devastated.

LVS Revenue Chart (TTM)

LVS revenue (TTM) given by YCharts. TTM = 12 rolling months.

The benefit to investors is when a recovery occurs in the gaming industry. I think there is going to be a huge increase in demand around the world, and Las Vegas Sands should be one of the beneficiaries. . In the United States, we have seen a rapid recovery when casinos reopen and that is before the threat of COVID-19 even subsided. In October, gambling revenues on the Las Vegas Strip were down only 30.2% from a year ago, and the UNLV’s Center for Gaming Research reports that gambling revenues in the United States fell only 13.7% in September compared to a year ago. Macau and Singapore restrictions are stronger today, but when travel reopens there is no reason to believe that gaming revenue will not recover in late 2021 and into 2022, bringing back the flows. cash flow to normal.

The dividend is currently suspended but was paid at an annualized rate of $ 3.16 earlier this year. If it comes back – as I think it will be given Las Vegas Sands’ excess cash flow and its dividend growth history – it would equate to a 5.5% dividend yield over the course of the year. share today, a good deal for a company operating in very profitable sectors. , highly regulated gaming markets in the United States and Asia.

No love for wireless

The market has not liked the wireless telecommunications industry for some time now, and AT&T has fallen out of favor like others in the industry. It didn’t help that huge acquisitions like DirecTV and Time Warner didn’t fare particularly well. But despite these problems, AT&T continues to produce money and pay a high dividend yield of 7.2%.

T Revenue Chart (TTM)
The data source: YCharts.

What AT&T has going for it right now is the consistent cash flow from its standard wireless business and the potential benefit of rolling out 5G technology across the country. 5G is expected to enable new technologies such as autonomous vehicles, mobile virtual reality, more connected devices and other innovations. If these take hold, they could help the company increase revenue and profitability, making today’s high dividend yield a good deal for long-term investors.

High dividend yields to buy today

Each of these stocks is cheap for a reason. But if we look at a year or two, they should all be fully recovered from the pandemic and again producing money in large numbers. This is why these stocks are cheap – embarrassingly cheap – today.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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