6 Dividend Stocks with High Yields and Low P/E Ratios
- These six dividend-paying stocks have above-average yields and lower P/E multiples. These large-cap stocks have P/Es and dividend yields 20% better than the average S&P500. In addition, these stocks have positive earnings growth.
- JP Morgan (JPM) – This bank has a dividend yield of 3.41% and a low PER of 10.4x. Revenues are expected to increase by 14% in 2023.
- Verizon (VZ) – This telecommunications company has a dividend yield of 5.17% and a forward P/E of just 9.2x, with earnings expected to rise in 2023.
- Novartis AG (NVS) – This pharmaceutical company has earnings growth of 9.3%, a forward P/E of 14.1x and a dividend yield of 3.72%.
- United Parcel Service (UPS) – This shipping company has good earnings growth with a forward P/E of 13.37x and a yield of 3.55%.
- Royal Bank of Canada (RY) – This Canadian bank has a forward P/E of 11.2x, a yield of 3.8% and an earnings growth rate of 6.8% forecast for 2023.
- Goldman Sachs (GS) – This investment bank is cheap with a forward P/E of almost 8.0x, growth of 6% in 2023 and a yield of 2.61%.
The average yield of the SPDR S&P 500 ETF (NYSEARC:TO SPY) is 1.33%. Other sites place the average return of the index at 1.59%. However, our dividend stocks have yields above 1.59%.
The average price/earnings ratio (P/E) of the SPY ETF is 26.45x and the index has a multiple of 19.7x. However, stocks on this list are 20% better with 16x P/E and yields of 2.5%.
Investors in these large-cap stocks will benefit from above-average performance. However, that doesn’t necessarily mean they won’t fall off. These securities should tend to perform better than the average security, compared to the SPDR S&P 500 ETF Trust (NYSEARC:TO SPY) or the S&P 500 Index.
Additionally, each of these large-cap dividend-paying stocks has a positive earnings outlook for 2023. Let’s dive in and look at these stocks:
|JPM||JPMorgan Chase & Co.||$126.25|
|VZ||Verizon Communications Inc.||$50.17|
|UPS||United Parcel Service, Inc.||$174.16|
|RY||Royal Bank of Canada||$101.79|
|GS||Goldman Sachs, Inc.||$320.80|
Dividend stocks: JPMorgan Chase (JPM)
- Market cap: $370.16 billion
JPMorgan Chase & Co. (NYSE:JPM) is a very cheap large money center bank trading for just 10.4x the forward P/E. Earnings are expected to rise 14% in 2023 to $12.52, according to Refinitiv’s survey of 22 analysts. So, at $117.34 as of May 20, JPM stock has an expected 2023 P/E of just 9.37x. This is very cheap and equates to an earnings yield of 10.67%.
Additionally, JPM stock now has a dividend yield of 3.41% with its $4 annual dividend yield. The company can clearly afford this dividend given its earning power and positive earnings outlook.
Additionally, JPMorgan buys back large amounts of its stock each quarter. In the first quarter (Q1) alone, it repurchased over $2.45 billion in stock. This equates to approximately $10 billion per year, or a redemption yield of 2.9% per year for shareholders. These factors make JPM stocks one of the top dividend-paying stocks on this list.
- Market cap: $210.10 billion
Verizon Communications (NYSE:VZ) is a major telecommunications stock with a very cheap valuation and a very good dividend yield. At 5.17%, the yield is the best in this list of dividend-paying stocks with low valuations and good earnings growth.
For example, at $49.53 on May 20, VZ stock has a forward P/E multiple of just 9.2x. Additionally, with earnings per share (EPS) of $5.56 forecast for 2023, the forward 1-year P/E drops to just 8.9x.
Additionally, the Verizon Company is free cash flow (FCF) positive, having produced $1 billion in FCF in the last quarter. This helps pay its large dividends to shareholders. It has increased its dividends every year for the past 18 years. These factors make VZ stock one of the best dividend-paying stocks on this list.
Dividend stocks: Novartis (NVS)
- Market cap: $1,200.66 billion
Novartis (NYSE:NVS) is a large pharmaceutical company with good earnings growth and a low valuation. The stock has an attractive dividend yield of 3.72% on May 20 of $89.42 and its annual dividend payout of $3.33.
Additionally, Novartis expects earnings growth forecast of 9.3% from $6.23 at EPS this year to $6.81 in 2023. Therefore, it has a forecast P/E multiple of only 13.1x for 2023. This reflects the earnings power of its drug portfolio.
Additionally, Novartis can clearly afford to keep its $3.33 dividend, as it has a payout ratio of 53% this year and 49% next year. In addition, it has paid dividends to its shareholders in each of the past 25 years. And for the past 3 years, it has increased the dividend every year.
Additionally, Novartis began buying back large amounts of its shares. In the first quarter, it repurchased more than $2.5 billion of its stock. This gives it a redemption yield of 5.2% on top of its dividend yield of 3.72%. This makes NVS one of the most attractive dividend-paying stocks on this list.
United Parcel Service (UPS)
- Market cap: $151.87 billion
United Parcel Service (NYSE:UPS) is a major shipping company with good earnings growth and a forward P/E of 13.5x for 2022. At $171.04 per share as of May 20, UPS shares are trading at just 12.8 times the 2023 EPS forecast of $13.37.
Additionally, with its annual dividend of $6.08 (a payout ratio of 48.5%), UPS stock has an above-average dividend yield of 3.55%. Additionally, UPS has increased its dividend in each of the past 22 years. This should reassure investors that it will continue to increase the dividend even in a recession.
The fact that UPS also generates large amounts of free cash flow allows it to buy back its common stock. This helps create shareholder value in addition to the high dividend yield. This also makes it one of the best dividend stocks.
Dividend Stocks: Royal Bank of Canada (RY)
- Market cap: $144.27 billion
Royal Bank of Canada (NYSE:RY) is a profitable Canadian bank with good earnings growth that is very cheap and has an above average return. At $99.17 as of May 20, RY stock is trading for just 11.4x analyst forecast of $8.67 for 2022. Additionally, for 2023, analysts forecast growth of 6.8% at $9.26, putting RY stock on a forward P/E of just 10.7 times.
Additionally, given that the bank pays $3.77 per share in annual dividends, RY stock has an attractive dividend yield of 3.8%. RY stock has paid dividends in each of the past 32 years. In fact, the Royal Bank of Canada has increased the dividend in each of the past 6 years. It is therefore very likely that the bank will continue to increase the dividend in the future.
Goldman Sachs (GS)
- Market cap: $110.35 billion
The Goldman Sachs group (NYSE:GS) is a cheap investment bank and commercial bank. In 2022, 23 analysts have an average EPS earnings forecast of $38.35, which puts Goldman on a forward P/E of just 8x. Additionally, analysts expect earnings to climb 6.1% in 2023 to $40.71. At $306.80 on May 20, the 2023 P/E multiple drops to just 7.5 times earnings. That’s very cheap for an investment bank with such a reputation.
Additionally, since Goldman Sachs pays an annual dividend of $8 per share, its dividend yield is attractive at 2.61%. Additionally, Goldman has paid dividends in each of the past 22 years and increased them in each of the past 5 years.
Goldman Sachs is very shareholder friendly. In the last quarter alone, it repurchased $2 billion of its stock. At this rate, the stock has a redemption yield of 7.59% on top of its 2.61%.
Given these factors, it is one of the most attractive dividend-paying stocks on this list.
As of the date of publication, Mark Hake did not (directly or indirectly) hold any title in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.