Investors can have their higher yields and capital appreciation potential, too. But, of course, there are always added risks to consider, and when it comes to the hard-hit higher-yielders out there, the fundamentals and growth narrative have taken a turn for the worse. As their share prices have slid, their yields have swelled, but with their managers hard at work on turnaround efforts, there is still the potential for upside.
And in this piece, we’ll check in on four “sizzling” higher-yielding names going for less than $50 per share that still have potential for upside. Indeed, that checks a lot of boxes for yield-hungry investors who also desire capital gains and a bite-sized price of admission. In any case, many of the higher-yielding stocks have fallen so much that their share prices are well below the $50 mark. The big question is whether they can appreciate while keeping their dividends intact and perhaps in a position to grow further. Let’s quickly check on three names worthy of your radar.
Dine Brands
Dine Brands (NYSE:DIN), currently going for $25 and change, is a mid-cap ($388 million market cap) dine-in restaurant play that’s seen more than its fair share of challenges over the years. The stock has imploded by more than 76% and now sports a yield of 8.1%. Indeed, the dividend may be a huge commitment, but it still looks quite well covered with a payout ratio that’s still under 70%.
The firm behind Applebee’s and IHOP faces tremendous competition, and if the consumer is in for a hit if unemployment rises further from here, Dine Brands’ woes could continue for longer. Indeed, there are significant margin pressures, but the balance sheet remains in decent condition.
Free cash flows are still in a good spot and can keep the dividend intact as management looks to pursue efforts to offset the scars dealt by inflation (higher labor and ingredient costs). For patient investors betting on consumer resilience, I like the name at 8.4 times trailing price-to-earnings (P/E) for the dividend and the potential for multiple expansion as IHOP looks to follow up on the relative strength in Applebee’s in the last quarter.
Wendy’s
Sticking with the restaurant theme, we have the home of the sizzling Dave’s Double in Wendy’s (NYSE:WEN), which, like Dine Brands, has been up against it of late. At $8 and change with a 6.4% yield, shares look tempting, just like the Wendy’s eats.
And at 9.1 times trailing P/E, you’re certainly not paying a high price for a firm that seems to have only the negatives priced in. After sagging 64% from its high, WEN stock has hit new multi-year lows. And I think the $1.66 billion fast-food chain is worth buying now that there’s a turnaround plan in place.
The “Project Fresh” strategic plan could pay big dividends for investors willing to step in here. While it’s a plan that takes time and effort, I do think income investors seeking upside ought to consider nibbling at these unprecedented depths. Wendy’s has taken a bit hit, but it’s still a cherished brand and one with comeback potential.
Pfizer
Finally, we have troubled pharma stock Pfizer (NYSE:PFE), which is right back below $25 per share after the TrumpRX deal luster wore off in the past two weeks. In a prior piece, I corrected predicted that the sudden bounce in PFE stock would be short-lived, likely due to the margin hit of lower drug prices and the potential for other pharma firms to make similar deals with the Trump administration, rendering Pfizer’s deal less meaningful.
Now that most of the TrumpRX hype is out of the stock, should investors look to buy while the yield flirts with a 7% yield again? And is there still more than 33% upside in the stock as investors turn their back on the name? I think the latest dip is buyable, especially for those tempted by the 7% yield. The stock faces a slew of challenges as it hopes to get its growth engine humming again.
Though I view significant uncertainty with the name (as is the case with most biopharma firms facing patent cliffs), even at today’s seemingly depressed valuations, risk-takers might wish to be a net buyer of the dip. If Pfizer can pull a blockbuster from its pipeline, the upside could have the potential to be gargantuan. Until then, I’d rather sit patiently on the sidelines.
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