If you have a modest nest egg, you might want to chase cheap listings so you can buy shares in larger lots. Buying stocks priced below $20 can be tempting.
But “dirt cheap” doesn’t always mean “good value.” In fact, many low-priced stocks trade where they trade for legitimate reasons, among them weak earnings, heavy debt and/or broken business models that may never recover.
Still, if price alone isn’t a sign of a good stock, then neither should price alone signal a bad stock. The important thing is to focus on fundamentals.
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Solid companies with stocks that trade around $20 per share can generate reliable cash flows based on proven business models. Indeed, these are real reasons to invest, beyond price.
Our top picks for stocks priced under $20 per share are established are established companies with respected brands. They have market values greater than $1 billion. And their business models support stable dividends.
Ford Motor
(Image credit: Maxim Konankov/NurPhoto)
- Sector: Consumer discretionary
- Market value: $59.6 billion
- Dividend yield: 4.3%
Ford has invested heavily in electric vehicles and is selling almost 100,000 units annually. But business is still driven by traditional gasoline-powered models such as Ford’s F-Series pickup truck, the best-selling vehicle in the U.S. regardless of powertrain.
While not immune to volatility, the consumer discretionary stock offers long-term exposure to onshore manufacturing and transportation trends that have wide support by consumers and policymakers alike.
With a generous dividend of more than 4%, there are multiple reasons to stay patient and buy and hold this low-priced stock for its long-term potential.
Huntington Bancshares
(Image credit: Emily Elconin/Bloomberg)
- Sector: Financials
- Market value: $34.6 billion
- Dividend yield: 3.7%
Huntington Bancshares (HBAN) is an Ohio-based regional bank that serves consumers, small businesses and commercial clients across the Midwest.
The company offers a wide range of services, including checking and savings accounts, mortgages, auto loans, credit cards and wealth management, as well as business lending.
Huntington is not exposed to global risks like Wall Street megabanks with proprietary trading desks. Like most regional banks, it generates revenue by making practical loans to households and businesses.
This is no small-fry financial stock, however, with current assets of nearly $300 billion. That’s enough scale to support a reliable dividend and make HBAN a top stock trading below $20.
Newell Brands
(Image credit: Brandon Bell/Getty Images)
- Sector: Consumer staples
- Market value: $2.1 billion
- Dividend yield: 5.7%
Indeed, a diversified product line is Newell’s biggest strength, as it generates revenue from a collection of everyday goods rather than resting on a one-dimensional business model.
Multiple moving parts with varying exposures to the consumer economy can make it hard for the company to deliver breakneck growth.
But Newell offers a generous dividend yield, and management has spent recent years streamlining operations and reducing debt to provide long-term stability.
Nokia
(Image credit: Angel Garcia/Bloomberg)
- Sector: Information technology
- Market value: $80.7 billion
- Dividend yield: 1.4%
Nokia (NOK) is best known for its former dominance in mobile phones.
Today, the tech stock provides the equipment supporting fiber-optic and cloud-computing networks, as well as hardware essential for 5G infrastructure.
With a customer base that includes telecom providers, governments and large enterprises, Nokia has deep relationships with clients and expertise that’s hard to match.
As demand for faster and more reliable data networks continues to grow, this telecom infrastructure company will only be more important in the years ahead. Stability makes NOK a solid low-priced stock.
Ambev
(Image credit: Jonne Roriz/Bloomberg)
- Sector: Consumer staples
- Market value: $48.9 billion
- Dividend yield: 1.2%
Ambev produces and distributes beer, but it’s also licensed to make soft drinks such as Gatorade, Lipton iced tea and other products owned by PepsiCo (PEP).
Legacy soda and beer brands face headwinds in the U.S. because of changing consumer tastes. But growth is strong south of the border.
The dividend has grown more than 40% over the last five years, and Ambev is well-positioned to continue to support a generous yield.
