Two Outstanding Dividend Shares to Acquire Immediately at a Cost Under $200 Each
Two Outstanding Dividend Shares to Acquire Immediately at a Cost Under $200 Each
Dividends play a significant role in a varied investment portfolio. They provide worth to shareholders even during market downturns and serve as a dependable source of passive income alongside stock price growth. Generally, dividend stocks gravitate towards large, secure companies, fortifying your portfolio.
Research suggests that dividend stocks may outperform other stocks in the long term, like the traditional slow-moving tortoise against the fast-paced growth stock hares. This is evident in successful investment companies like Warren Buffett's Berkshire Hathaway, loaded with dividend stocks and outperforming the S&P 500 for numerous decades.
Currently, the market is on the rise, ascending 26% this year, reaching above-average valuations. This raises questions about an upcoming correction or continued growth; nobody has a definitive answer. This highlights the importance of owning dividend stocks. Two promising options are Ally Financial (-2.66%) and Realty Income (-0.11%).
1. Ally: Challenging the Big Banks
Ally is considered a modest or average bank within the vast American banking sector, but it's distinguishing itself as it highlights its unique platform. Its various competitive advantages contribute positively to its potential for growth and market dominance. It may eventually join the elite tier of U.S. banks.
Ally's competitive edge starts with being entirely digital, making it the leading all-digital bank in the United States. It has a substantial consumer account customer base of 3.3 million and consistently adds retail deposit customers for 62 consecutive quarters, including 57,000 in the third quarter.
Part of Ally's success lies in its established position as the top prime auto lender in the nation. Originally the financial branch of General Motors, it possessed a fully developed auto loan business when it was spun off in 2009. Auto loans remain its primary business, with robust demand persisting even in the challenging interest rate landscape. It had $9.4 billion in originations in the third quarter.
Ally's stock has faced pressure, with a significant drop in September following the disclosure of unexpectedly high default rates. A recent update indicates that auto loan defaults are high at 2.24%, but Ally has taken proactive risk management measures to lower this rate. Ally's stock rebounded following the election, along with most bank stocks, yet it remains relatively inexpensive, trading at a mere forward 1-year price-to-earnings ratio of 8 and a price-to-book value of 0.9. At this cost, its dividend offers a 3.2% yield, making it an opportune moment to include this promising Buffett stock in your portfolio.
2. Realty Income: The Unmissable REIT
Realty Income is a real estate investment trust (REIT) that might be unmatched in its worth. It provides investors with a blend of attributes desirable in a dividend stock, such as a high dividend yield, growth potential, and stability. Moreover, it boasts a rare feature: a monthly payment.
Realty Income has consistently paid a dividend for 653 consecutive months and raised the dividend for 108 consecutive quarters. It currently offers a generous 5.4% yield.
What sets it apart is its robustness and consistency in dividend growth. Not all REITs can guarantee stable payouts or growth. Generally, the higher the yield, the more potential for risk. High-yield REITs with yields exceeding 7% are often speculative investments in industries like mortgage-backed securities, volatile to economic factors.
Realty Income is a retail REIT that offers a diverse and more secure tenant base, with established, dependable tenants like Walmart and Lowe's. It maintains an occupancy rate that seldom falls below 98%, except during the early stages of the pandemic when many stores were temporarily closed.
Realty Income's stock experienced a nosedive along with other real estate companies under the pressure of escalating interest rates. Yet, this situation now emerges as an enticing opportunity to purchase Realty Income stock for its steady and reliable dividend. It's an all-weather stock, offering passive income and stability, and a good time to invest in its shares can vary little.
- Ally's strong financial performance, including its high auto loan originations and digital banking success, has attracted the attention of notable investors like Warren Buffett, who sees the potential for its stock to outperform the market due to its attractive dividend yield and inexpensive valuation.
- To effectively manage one's investment portfolio and diversify risks, experienced investors recommend considering not only potential growth stocks but also dividend stocks, such as Realty Income, which offer a consistent income stream and have performed well despite market fluctuations, thanks to their reliable tenant base and attractive dividend yield.