Dividend stocks are the kind of stocks that aren’t exciting until they are. For several years, interest rates at or near zero percent, combined with tame inflation, made growth stocks the place to be. For many investors, they still are.
However, since 2022, rates have been climbing higher, as has inflation. And investors now anticipate the Federal Reserve will likely keep interest rates at their current level for longer than expected. That increases interest in dividend stocks that offer yields above inflation and the 10-year rate.
These stocks can act as anchors for your portfolio because they provide reliable, passive income. Investors who don’t need that income today can reinvest those dividends and let the power of compounding do its work.
Investors Should Prioritize Growth and Value
That said, many investors will look at the current stock price of some dividend aristocrats and kings and feel the juice isn’t worth the squeeze. That’s because with dividend stocks, accumulation is the key.
The good news is that there are still many dividend stocks that have stable payouts, yields over 4%, and can be purchased for under $30 per share. These are stocks that can anchor a portfolio for the long haul and still offer opportunities for long-term share price growth.
AT&T Is Dusting off a Familiar Playbook
AT&T (NYSE: T) has gone through many changes in the past 30 years. The wireless boom that started in the early 2000s led to the phrase “this isn’t your grandparent’s AT&T.” That was as the company moved away from its legacy phone business into the digital future.
Along the way, the digital future included an AT&T that ventured far afield from its core business, including its purchase of WarnerMedia. The sale of that business in 2022 forced the company to cut its dividend in half, and with it, the company lost its dividend king status.
The company has become leaner and is back to its telecom roots. But once again, the business is changing. AT&T’s legacy business is under pressure, and that may weigh on the company’s short-term results. However, it is investing in a software-defined, AI-ready and “open” network. This future includes its EchoStar spectrum deal to boost wireless capacity.
AT&T believes this will give the company a more durable competitive advantage over time. That could result in the company raising its payout, which hasn’t increased since the WarnerMedia sell-off. That said, investors are still getting a dividend with a yield of right around 5% to go along with a safe payout ratio.
Vale Gives Investors 2 Long-Term Catalysts
Vale S.A. (NYSE: VALE) gives investors the benefit of two converging themes. First, the Brazilian company fits the emerging markets story. Second, the company is part of the metals and mining sector. It’s a leading iron ore and nickel producer and has significant exposure to copper. It also trades at a forward price-to-earnings (P/E) ratio of around 7x, making it a deep value candidate.
Skeptics have two concerns. The first is that China is Vale's largest customer for iron ore, the core ingredient in steel. The problem is that China is in a structurally weak steel market, and there’s no end to that in sight.
Critics will also note that Vale has been as likely to cut its dividend as to raise it in the past five years. But the company’s payout ratio by many future metrics, like next year’s earnings or cash flow, is well supported. The likelihood of explosive growth in the mining and metals space could drive higher future payouts, with a dividend yield over 4%.
Energy Transfer Is Modeling for Robust Growth
Energy stocks have been volatile amid the back-and-forth over the Strait of Hormuz. But this is a time when it’s important to understand why Energy Transfer (NYSE: ET) should be on investors’ radars.
The answer could simply be that the company has built a pipeline of expansion projects designed to sustain, and potentially grow, its distribution well into the decade. Energy Transfer plans to spend $5.5 billion to $5.9 billion on expansion projects in 2026 alone, anchored by up to $9.5 billion in major natural gas pipeline investments.
The crown jewel is the $5.6 billion Desert Southwest Pipeline, slated for completion by late 2029. The company is also building pipeline laterals to supply AI data centers and gas-fired power plants. That's a demand catalyst that didn't exist just a few years ago.
With projects scheduled to enter commercial service through early 2030, Energy Transfer has enough growth visibility to support its stated plan to increase its distribution by 3% to 5% annually. That comes on top of a yield that already sits above 7%.
The article "3 Dividend Stocks Under $30 to Anchor Your Portfolio" first appeared on MarketBeat.
