Do you have $5,000? These 2 high-yielding dividend stocks are near their 52-week lows


Buying dividend-paying stocks when their value has fallen can be beneficial for investors because not only can you secure yourself a higher than normal return, but you can also set yourself up for gains in the future. As long as the company remains healthy and its finances are strong, buying a stock with a dividend near its low could be a very profitable decision for you in the long run.

A few stocks that are offering impressive returns and are near their 52-week lows are Medtronic (MDT -1.59%) and Lumen Technologies (LUMN -2.48%). Both have generous yields that are much higher than the S&P500 average of 1.7% and can be great stocks to invest $5,000 in now.

1.Medtronic

Medtronic is a medical device company that operates in 150 countries, helping people with more than 70 different conditions. This should be a relatively stable investment. However, year-to-date, its shares are down 14%, struggling with the S&P 500, which is down 18%.

The problem is that the company is struggling with supply chain issues and sales for the period ending July 29 were down about 8%, which also included a negative currency impact.

During the company’s latest earnings call, management also said that while for the most part hospital procedures have returned to normal levels, “COVID continues to cause cancellations and postponements of procedures in some pockets of the world. “. One country in particular where Medtronic struggled was China, where revenue fell 9% due to COVID-related lockdowns.

But these are just temporary issues that won’t hamper Medtronic’s business in the long run. At under $89, the stock is just a few dollars off its 52-week low at $85.66. Its valuation may look rich with shares trading at 23 times earnings, but as supply chain issues improve, so should the company’s profitability.

Encouragingly, while Medtronic’s business faces challenges, its dividend remains relatively safe. Medtronic’s payout ratio is below 70%, and with the stock price falling, its yield is now 3%. On a $5,000 investment, that would mean an additional recurring income of $150 each year.

Medtronic is also a dividend aristocrat – a company that has paid and increased its base dividend every year for at least 25 consecutive years – suggesting that your dividend income will also increase over the years as you hold onto the stock.

2. Lumen Technologies

Telecom company Lumen, formerly known as CenturyLink, is paying an incredibly high yield of 11%. On a $5,000 investment, the current yield could generate over $550 in annual income for you. This high performance was not intentional; Lumen shares are down 30% this year. Before this drop, the return was closer to 7%.

The company’s declining sales in recent years have turned many investors away from the stock and is why it struggles, especially in a bear market. But Lumen’s future should be much brighter as the company upgrades its network. Its new Quantum Fiber service is faster, has no contracts or data caps, and promises 99.9% reliability. The company continues to invest in service as it seeks to grow and reach more customers. Currently, it operates in 12 states, covering 20 different markets.

Investors will have to be patient with Lumen, but the stock has the potential to generate strong returns if the Quantum Fiber service performs as well as the company hopes. In the meantime, the dividend still looks safe. For the period ending June 30, the company’s diluted earnings per share totaled $0.34 and was higher than the $0.25 Lumen pays out in dividends each quarter. This year, the company also expects its free cash flow to be at least $2 billion, about double what it has paid out in dividends over the past four quarters.

Lumen is a bit of a contrarian choice, but it could turn out to be a good choice. Between the high dividend yield and the potential for the company to return to the good graces of dividend investors if its results improve, this could be a source not only of recurring income, but also of impressive capital gains.

David Jagelsky has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

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