13 Dirt Cheap Dividend Stocks Valued Under 10 Times Earnings

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Capital One
> About eight times expected earnings

Capital One Financial Corp. (NYSE: COF) is much better known as a credit card issuer than as a formal bank, but it does have bank and cafe locations in certain regions around the United States. Despite it having grown revenues for years, many investors believe that Capital One will be among the harder-hit banks in the next economic downturn due to such a large exposure to consumer credit cards and the expected rise in delinquencies and charge-offs that would follow such a downturn. Still, it is expected to grow revenues by the low- or mid-single digits, and a recent Jefferies upgrade called for close to a 30% payout increase. That means its $89.50 current share price and current yield of almost 1.8% might jump to over 2.3%, if the firm’s analysis proves to be correct.

Capital One’s $11.19 EPS in 2018 is expected to dip to $11.05 in 2019, but it is then expected to rise to $12.09 in 2020. That’s a lot more money in its pocket.

CVS Health
> About 7.5 times expected earnings

CVS Health Corp. (NYSE: CVS) has fallen far out of favor with the investing community. On top of drug pricing fears and deeper regulations expected ahead in health care, the former CVS Caremark further complicated how to evaluate the shares when it acquired health insurer Aetna in a $69 billion merger. To muddle matters further, Wall Street analysts are atrocious when it comes to factoring in an entire new company structure’s earnings and revenues into models including the acquirer. CVS shares are now down over 50% from their peak in 2015, and the dividend yield is about 3.8%, based on the $53.00 share price. With a market cap of almost $69 billion, CVS is expected to generate annualized revenues of $258 billion by the end of 2020.

With the 2018 EPS of $7.08 expected to fall to $6.84 in 2019, the 2020 consensus estimate of $7.22 EPS would value CVS at less than 7.4 times next year’s earnings estimates. Its dividend is deemed safe, as well with a payout rate of less than 30% of normalized earnings.

General Motors
> About 5.5 times expected earnings

General Motors Co. (NYSE: GM) is currently deemed to be cheaper than rival Ford due to opposite share performance of late. GM has much more exposure to China as its largest car market, and Chinese consumers could become anti-American if the trade war persists. On top of China woes, GM and its rivals have all faced peak-auto sales trends, and many historic car buyers opt for ride-sharing, public transportation or app-order services like Lyft and Uber. Its CEO is one of the most highly paid in America.

At about $37.25 a share, GM’s 2018 earnings of $6.54 per share are followed by consensus estimates of $6.73 in 2019 and $6.24 in 2020, with sales expected to contract less than 1% each year. GM also pays its shareholders a dividend north of 4% and has an earnings payout rate of less than 25% as a buffer to keep a strong dividend.

Gilead Sciences
> 9.5 times expected earnings

Gilead Sciences Inc. (NASDAQ: GILD) is a top biotech that seems to have lost its way after effectively helping to cure hepatitis B. Its stock also has been looking for a bottom, while many former investors and traditional investors don’t want to think of the term “biotech” and “value” in the same sentence. Gilead is effectively not growing after three straight years of revenue contraction. If Wall Street analysts are correct, Gilead’s revenue decline is basing out, and there might even be some low-single-digit revenue growth in 2020 as EPS have been basing out as well. The company also has bought back stock, and it spent more than $11 billion to acquire Kite Pharma, as the company hopes to diversify its revenues from HIV and hep-C. Gilead has partnered with small companies to see if it can land a ride into the next mega-blockbuster drug.

Shares are at $65.50, and Gilead trades at roughly 9.5 times expected 2019 and 2020 earnings per share. The $2.52 annualized dividend generates better than a 3.8% yield while investors wait for Gilead to find some growth again. Its shares are down about 45% from the peak in 2015, and even then it still has an $83 billion market cap.

Goldman Sachs
> About 8.5 times expected earnings

Goldman Sachs Group Inc. (NYSE: GS) historically has traded at a premium to its peers, and now the bank holding company is taking on more efforts that might end up making it a virtual bank for consumers that it has ignored until recently. After taking a beating of late, earnings are expected to trough this year and recover in the next. After international scandals followed negative news on the domestic front, Goldman Sachs’s reputation took a hit and its shares now even traded under the stated book value (at 0.94 times book). This doesn’t sound at all like the “Golden Slacks” of the past, but Goldman Sachs does offer a 1.7% dividend yield now.

With a 4% expected sales drop in 2019, that is anticipated to grow by the same amount it dropped next year. And the $25.27 EPS from 2018 is expected to drop to $23.30 in 2019 but recover to $25.89 in 2020. There are of course some issues keeping the stock down for future liabilities, but the shares are down over 25% from the highs at the start of 2018.