Smart investors know not to chase the hottest investment trend of the current moment. Whether it's artificial intelligence (AI) today or any other investment fad from the last few decades, this is where investors can lose their shirts if they are not careful. Just because a sector is popular to invest in does not mean it will be profitable for you to buy these stocks.
Earnings, not popularity, will determine shareholder returns over the long run. Steady dividend payers are an indicator of highly profitable businesses that can deliver great returns. Here are three smart dividend stocks investors can buy for $150 right now.
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Aside from recent weeks amid the ongoing conflict in the Middle East, energy stocks have been out of favor for the last few years, driving down the share prices of companies like Occidental Petroleum (NYSE: OXY). This Berkshire Hathaway favorite is still below its 2022 highs and now yields 1.7%.
While not a huge dividend payer today, Occidental Petroleum has a preferred position as an oil and natural gas producer focused on the secure United States market. With oil prices soaring, the company should be able to generate outsize profits and serve as a ballast for any portfolio in times of high inflation.
The last time oil was above $100, Occidental Petroleum earned around $10 billion in net income compared to its current market cap of $57 billion, and that was in a period when its production was lower than it is today. If oil prices remain elevated, Occidental's balance sheet will begin to overflow with cash to fund dividend payments.
Another dividend stock investors should look at closely is Ally Financial (NYSE: ALLY). The online bank currently pays a dividend yielding 3.3% and could be a good dividend growth stock in the years ahead.
Ally has not grown its dividend in the last few years due to rising interest rates affecting its banking operations and difficult conditions for its automotive lending business. However, today, net income has begun to recover and is close to reaching $1 billion again. That looks cheap compared to its current market cap of $11 billion.
The first move Ally's management will make is to resume repurchasing outstanding shares, which it paused during this tough period. Once it repurchases stock, it will reduce its shares outstanding and allow management to resume steadily increasing its dividend per share.
