Bargain-Priced Dividend Stocks
Are you on the lookout for affordable stocks? How about those affordable dividend stocks? If you’re interested in well-known brands at discounted prices, you’re in luck!
Current Market Situation
The stocks of two prominent American companies, UPS (NYSE: UPS) and Whirlpool (NYSE: WHR), are currently available at bargain rates. Both companies have seen their stock prices fall by over 60% from their previous highs.
Recent Earnings Reports
Following their latest second-quarter earnings reports, both stocks experienced a drop of over 15%. However, one appears to have better chances for recovery.
Dividend Yields
Both UPS and Whirlpool have a strong history of paying and increasing dividends. By July, their declining stock prices had propelled their dividend yields to surpass 7%.
Sustainability of Dividends
While this yield is enticing, neither company is generating sufficient free cash flow to maintain it. Companies unable to cover their dividends with free cash will have to rely on their cash reserves, increase debt, or seek alternative funding methods.
CEO’s Commitment
UPS’s CEO, Carol Tome, emphasized the company’s dedication to maintaining a stable and growing dividend. This commitment may necessitate $5.5 billion in dividends this year, likely exceeding its free cash flow. While this keeps the yield high, it also raises concerns about potential unexpected dividend cuts.
Whirlpool’s Strategy
In a more manageable approach, Whirlpool has reduced its annual dividend from $7 to $3.50 per share. This decision brings its yield down to 4% but ensures greater sustainability of its dividend payout, reflecting a more favorable long-term position than UPS’s vulnerable situation.
