Investing

3 Dividend Stocks Under $100 To Buy Now

Gerelyn Terzo

Published: April 30, 2024 6:47 am

During these volatile economic and market times, investors are hunting greater stability more than ever before. One of the few things that has stayed the same in changing market cycles has been the dependable income stream that dividend stocks provide.

Many companies pride themselves on their dividend track records, not daring to veer off course for fear of losing investor loyalty. While there’s always a risk a board of directors will lower or suspend distributions, there are also warning signals to watch out for first so you’re not caught unaware, like ratings downgrades on corporate debt.  

Stock market returns have been good of late, with the S&P 500 up 6% year-to-date. But many fear valuations are too lofty and are waiting for the next shoe to drop. As a result, many investors are looking to rely more heavily on the income stream that dividend stocks generate for their portfolios.

Now that tech giants like Alphabet (NASDAQ: GOOGL) are entering the dividend fray, you might be looking to take your shot. But at a steep $173 per share, Alphabet could start cannibalizing the portfolio it was meant to enhance. 

One strategy to pursue is to spread the wealth across cheaper stocks or funds, providing greater diversification to a portfolio and offsetting risk from any one sector or specific company. If you’re considering this approach, you’ll want to target companies that are priced under a certain threshold to achieve the desired results. But what if you could have the best of both worlds – steady passive income and capital gains? To that end, we’ve compiled a list of three-$100 dividend stocks including one REIT with varying dividend yields to buy now.

American Homes 4 Rent 

Source: Puttachat Kumkrong / Shutterstock.com

REIT Price: $36.60
Dividend Amount (Quarterly): $0.26 
Dividend Yield: 2.86%
Dividend History: Since 2013 
Free Cash Flow: $604.5 million  
Payout Ratio: 87%

With interest rates hovering at their highest in decades, the 30-year fixed-rate mortgage is keeping its grip on the 7.625% level. While this is bad news for the housing market, as many would-be homeowners remain on the sidelines until market conditions improve, rental demand has been soaring across U.S. markets alongside rental rates.  

One way to play this trend is through American Homes 4 Rent (NYSE: AMH), a Las Vegas-based REIT that invests in single-family rental homes. With a dividend yield of 2.86%, American Homes has been paying steady dividends for over a decade, giving income investors a dependable revenue stream. Even S&P Global finds AMH to be stable. American Homes pays a quarterly dividend of $0.26, the most recent of which was declared in February, for an annual distribution of $1.04 per share. 

Investors have been receiving steady distributions from American Homes since year-end 2013, when the dividend payout was $0.05. The REIT hasn’t skipped a beat since, at the very least maintaining its dividend each quarter. Something to note is that American Homes nearly doubled its distribution during pandemic era, from $0.10 in 2021 to $0.18 in 2022. Earlier this year, the board raised the dividend by 18% to the current payout. So it stands within reason that there could be more where that came from given the favorable environment for rental housing. 

In Q1, Citigroup improved its outlook on American Homes 4 Rent from neutral to buy and lifted the price target to $41, suggesting there’s 12% upside potential. One uncertainty at this REIT an executive shuffle amid the recent resignation of CEO David P. Singelyn, who has been at the helm since launch in 2012. He will be replaced by COO Bryan Smith.

Cisco Systems

Source: Alexander Koerner / Getty Images News via Getty Images

Stock Price: $47.98
Dividend Amount (Quarterly): $0.40 
Dividend Yield: 3.28% 
Dividend History:  Since 2011 
Free Cash Flow (Annual): $19 billion  
Payout Ratio: 47%

Tech stocks make an appearance with the addition of networking company Cisco Systems (Nasdaq: CSCO). With four decades of operating history under its belt, Cisco has stood the test of time. While it’s evolved over the years, it has managed to keep itself relevant with its acquisition strategy and strong leadership team, not least former CEO John Chambers, who saw annual sales increase from $1.2 billion to $47 billion on his watch. 

Cisco has been steadily paying dividends for over a decade and has a habit of increasing its distribution on an annual basis. In February, Cisco lifted its payout from $0.39 per share to $0.40, for an annual distribution of $1.60 and a dividend yield of 3.28%. 

While Cisco has been around since the 1980s, it has managed to stay relevant over the decades. In fact, you’ll find Cisco right in the middle of the hottest emerging technologies of the decade – AI.  You can’t have AI without secure network infrastructure, and that’s where Cisco comes in.

Earlier this year, Cisco plunked down $28 billion in cash for cybersecurity and analytics firm Splunk, not to mention its partnership with chipmaker Nvidia (Nasdaq: NVDA) to deliver secure ethernet infrastructure for AI.

Bank of America recently upgraded its rating on Cisco from hold to buy and lifted its price target to $60 per share, reflecting 25% upside potential. 

Starbucks

Source: Alex Wong / Getty Images News via Getty Images

Stock Price: $88.52
Dividend Amount (Quarterly): $0.57
Dividend Yield: 2.58% 
Dividend History:  Since 2010 
Free Cash Flow: $1.79 billion
Payout Ratio: 57% 

While the coffee retail industry might be crowded,  a new chapter of growth is unfolding for which Starbucks (Nasdaq: SBUX) is reinventing itself. With a commanding 40% market share in the U.S. coffee segment, one area in which Starbucks has been investing is coffee drive-thru locations to capture the latest growth wave. Starbucks drive-thrus are popping up in cities across the U.S.,  replacing traditional retailers in response to evolving consumer preferences. 

With tens of thousands of stores globally, Seattle-based Starbucks has been making uninterrupted dividend payments to investors since 2010, including a dividend yield of 2.57%. Last year, the coffee retailer increased its quarterly dividend amount by 7.5% to $0.57 per share. 

Earlier this year, Morgan Stanley upgraded shares of Starbucks to “overweight” and increased the price target to $120, representing upside potential of 36%. 

With these stocks in your portfolio, the odds are good you’ll be collecting passive income from dividend distributions alongside the potential for capital appreciation for years to come.