There’s almost no point in asking your friends if they enjoy bargains because, honestly, who doesn’t? Buying something below its perceived market value can be a rewarding experience, especially if you’re the one who figured it out.
So, let’s broaden the context to stock market trading. It’s no secret that buying low and selling high is one of the very basic tenets of success. However, the stock market is one of those funny places where investors often do exactly the opposite.
Some investors, like myself, look for bargains from time to time by investing in high-potential, high-yield stocks likely to increase in value in the next year. That way, they get capital growth and income all the while.
So, today, let’s look at cheap, high-yield dividend stocks ready to surge in the coming year.
How I Came Up With The Following Stocks
Like always, I used the trusty Barchart Stock Screener for this analysis. To get my list, I used the following filters:
- Number of Analysts: 12 or more. Consensus data is only significant if there’s actual consensus, meaning more than one person agrees about a stock’s score. I cranked this filter to the High and Very High settings.
- Current Analyst Rating: 4.5 to 5 (Strong Buy). To reinforce my choice of only getting the best of the best, I set the screener to look for stocks with only the highest analyst scores.
- Annual Dividend Yield: 5% or more. Like the previous filters, I set the screener to look for stocks with higher yields. 5% is the higher end of the “good dividend yield” range, so I set that as the minimum.
- P/E Ratio TTM: 20 or less. The price-to-earnings ratio measures how much the company earns compared to how much its stock trades for. This is a popular metric used to determine if a stock is undervalued or trading at a discount. However, the value doesn’t tell the whole story, so I will further compare it to an individual stock’s sector P/E.
After clicking on See Results, I got seven hits.
I then arranged them from highest to lowest dividend yields, and now I’ll discuss the top three, starting with the number one:
Civitas Resources (CIVI)
Civitas Resources, Inc. is an energy company focused on oil and natural gas production in the Denver-Julesburg (DJ) Basin of Colorado, a region known for its significant oil and gas reserves. Civitas is one of Colorado's largest pure-play oil and gas producers and is the state’s first carbon-neutral oil and gas producer.
As one of the most prominent dividend stocks in the market, Civitas is not shy about rewarding investors. Since 2022, the company has consistently paid regular and special quarterly dividends, with the latest amounting to $1.52 per share. This translates to a hefty $6.08 a year (forward), reflecting an impressive 12.5% yield.
It’s also cheap according to its 5.75 P/E ratio. For reference, the energy sector’s P/E ratio is estimated at 11.97 today. Analysts apparently agree, rating CIVI stock a 4.79 average score with an eye-watering 116.02% upside potential based on the high target price of $106. A triple-digit upside potential and a double-digit yield are tough to beat—that’s why CIVI is number one on this list.
Chord Energy Corporation (CHRD)
Chord Energy Corporation is an independent oil and natural gas company focused on exploration and production activities in the Williston Basin, which spans parts of North Dakota and Montana. The company also produces petroleum-based products like plastics, synthetic fibers, asphalt, and other petrochemicals.
Chord’s P/E ratio is 6.30, again much lower than the energy sector’s current P/E. The stock is also trading a few dollars away from its latest 52-week low, giving investors a rare opportunity to buy CHRD stock at a massive discount. And all that on top of a strong buy recommendation from analysts. They also peg the stock with a $252 high target price, reflecting a nearly 100% upside potential.
Like Civitas, Chord pays a regular and variable dividend. Its latest quarterly payout was $2.52, or $10.08 a year, if everything stays the same. Based on CHRD stock’s current trading price, that’s an excellent 8% yield.
Enterprise Products Partners LP (EPD)
Another popular dividend stock, Enterprise Products Partners L.P., is one of the largest publicly traded partnerships and a leading midstream energy company in North America. It operates a vast network of pipelines and storage facilities, primarily focused on transporting, storing, and processing natural gas, crude oil, refined products, and petrochemicals.
EPD currently pays 52.5 cents quarterly, or $2.10 annually, reflecting a more than decent 7.3% yield. Its P/E ratio is closer to the sector average at 11.12, though still lower. And you must admit its 7% yield alone deserves a spot on this list. Analysts are also optimistic about EPD stock, rating it a 4.67 average, an overall strong buy recommendation, and a $37 high target price. That’s a decent 26% upside potential right there.
Final Thoughts On the list
Dividend investing doesn’t have to depend solely on income. Capital appreciation is possible, especially when picking up top-shelf dividend stocks at a steep discount. So, have a look at these three companies, and see if they deserve a spot in your long-term portfolio.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
