12 Dirt-Cheap Dividends Yielding Up To 25%

The S&P 500 is about as pricey as it ever gets. It’s also in freefall as I write.

This is good news for anyone looking for a future bargain. The plunge, however, is really bad news for most retirees who don’t read this column. They tend to own nothing except “America’s ticker” via the SPDR S&P 500 Trust ETF (SPY).

At 24-times earnings (P/E ratio), SPY is expensive. After all, who has 24 years to wait to get paid back?

But the actual payback period is even worse for SPY. Most of its firms don’t pay out all of their profits as dividends. Collectively they yield just 1.4%, which means anyone buying SPY today can confidently “cash out” their initial investment by 2093.

(I’m not sure about you, but my lifestyle is not designed to make it another 71 years. My organs believe every new year is a gift.)

Since you and I are in “pay us back soon” mode, we want our retirement portfolio in stocks that:

• Are inexpensive (low P/E ratios).
• Pay a lot (high dividend yields).

This is the secret to retiring on dividends. Buy right and sit tight while good stocks pay us serious yields.

Today we’re going to highlight 12 single-digit P/E stocks that yield between 4.2% and 25.6%. Yes, that’s no typo. These potential “retirement makers” are priced right, and their payouts provide us with serious cash flow.

12 Cheap Dividend Plays

You won’t be surprised to learn that most of these stocks run in packs—or at least pairs. In many cases, entire slivers of the market are trading on the cheap, and these dividend payers represent the most discount-priced among them.

The financial space is teeming with underappreciated dividends. OneMain Holdings (OMF, 14.2% yield), for instance, provides personal installment loans to more than 2 million Americans, and its dirt-cheap 6.1 forward P/E comes despite the fact that shares are actually positive over the past year. New York Community Bancorp (NYCB, 5.9%) is a more traditional banking name, but at a nearly 6% yield, it’s delivering roughly 4x what the broader financial sector is.

Insurers have been largely overlooked, too. Unum Group (UNM, 4.2%) and Old Republic International (ORI, 13.0%) are both trading under 10 times earnings estimates and boast large (and growing!) payouts.

Despite being 2022’s best market sector by a mile, energy is still a relative value in some cases…and a screaming value in others.

Devon Energy (DVN, 4.9%), which last year merged with WPX, is an onshore exploration-and-production play that produces oil, natural gas and nat-gas liquids. It’s an oddity in the space, too, featuring a “fixed-plus-variable” dividend that ensures a base payout every three months that’s topped off based on its quarterly performance.

Then there’s Phillips 66 Partners LP (PSXP, 8.3%)—the Phillips 66 (PSX) MLP spinoff that owns energy infrastructure such as crude oil and natural gas liquids pipelines and terminals. After years of quarterly raises, the payout has stagnated since the start of 2020, but PSXP still offers exceptional yield…as long as you’re OK filling out that K-1.

You can also find dirt-cheap dividends in some surprising places.

For example, 360 DigiTech (QFIN, 5.8% yield) is a digital platform that helps financial institutions offer an affordable, unsecured digital line of credit, though it also provides risk management service to institutional clients via software-as-a-service modules. And it does so in its home country of China.

But look at the fuller group of stocks that fall within our parameters. Does anything stand out to you?

* Includes a special dividend (only considered in cases where the stock regularly issues special dividends)

** Fixed-plus-variable dividend

Brett Owens is chief investment strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: Your Early Retirement Portfolio: Huge Dividends—Every Month—Forever.

Disclosure: none