Two Cheap Dividend Growth Stocks More than 40% Below Their 52-Week Highs

The US stock market is on fire.

As such, most stocks are at or slightly below their 52-week highs. But there are some exceptions. Some stocks, for various reasons, have been left behind by the market.

And they’re significantly below their recent highs, creating potential deep value opportunities. Today, I want to tell you about two stocks that are more than 40% below their 52-week highs.

Furthermore, these are both dividend growth stocks. Each stock has a lengthy track record of paying growing dividends to shareholders.

And both stocks offer a market-beating yield. So if you want cheapness, a market-beating yield, and a growing dividend, these stocks might be worth a closer look. Ready?

Let’s dig in.

Dividend Growth Stock #1: Auburn National Bancorp  (AUBN)

Auburn National’s stock is 46% below its 52-week high.

The Alabama-based bank’s current stock price, as I speak, is under $36/share, while the 52-week high is $65.55. If you don’t like buying stocks at all-time highs, this stock is nowhere near that level.

Growth has been challenged in recent years, which likely explains the poor relative stock performance.

But you’re not going to find a stock growing at 20%/year available for a P/E ratio of 2. Investors sometimes have unrealistic expectations with growth and valuation. You tend to get what you pay for. If you want super high quality, be prepared for a commensurate valuation. If you want cheap, you’re going to have to deal with some things you might not like.

There’s no doubt that this bank been kind of stuck in the mud.

Both revenue and EPS are almost completely flat over the last decade. But that poor business performance appears to be reflected in the valuation. The P/E ratio of 16.6 is well below the broader market’s earnings multiple. And the P/B ratio of 1.2 is not only below its own five-year average of 1.5 but also below where most banks are trading at.

In addition, the stock yields a market-beating 2.9%.

That’s almost 50 basis points higher than its five-year average. Plus, this dividend has been increased for 20 consecutive years. With a 10-year dividend growth rate of 2.7%, I’d personally like to see more dividend growth to go along with a near-3% yield for it to make sense to me. But at almost 50% off of its 52-week high, this stock has been beaten down and is in the clearance aisle.

Dividend Growth Stock #2: Petmed Express Inc.(PETS)

Petmed Express’s stock is 48% below its 52-week high.

The online pet pharmacy’s stock is priced at under $30/share right now, which starkly contrasts with its 52-week high of $57.00. Most stocks I track and am personally invested in are pretty much right at their 52-week highs, but this stock is nowhere near its recent top.

Again, though, growth hasn’t been outstanding.

Growth here is better than what we can see with Auburn National, however. Revenue has compounded at an annual rate of about 2.9% over the last decade, while EPS grew at a CAGR of 7.4% over that period. Not outstanding. But it is solid performance.

That relatively superior business performance appears to be reflected in the valuation.

The P/E ratio of 19.5 is definitely lower than the S&P 500’s P/E ratio. It’s also slightly off of the stock’s own five-year average P/E ratio of 20.4. Moreover, the stock’s P/CF ratio of 14.9 does compare pretty favorably to the five-year average of 16.3. One other very appealing aspect of this name is the fact that it carries no long-term debt.

Best of all might be the stock’s market-smashing yield of 4.1%.

That’s 60 basis points higher than the stock’s five-year average yield. And this is a dividend that’s been increased for 13 consecutive years. The 10-year dividend growth rate of 9.4% is actually impressive, especially when paired with the yield. But the payout ratio, at almost 80%, is elevated from past dividend growth outpacing earnings growth. I wouldn’t be surprised to see future dividend growth slow down. That said, the stock offers a 4%+ yield, and it’s down almost 50% from its 52-week high. This is a beaten-down, higher-yielding dividend growth stock to consider.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.


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