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You may not have a lot money to invest these days, but the wild swings in stock prices are creating some compelling entry points for buyers, and you don't need a lot of money to get into the game these days. Most discount brokers are offering commission-free trading, and a growing number of trading outlets now allow you to buy fractional shares so you can you can put all your money to work.
Costco (NASDAQ:COST), Sirius XM Radio (NASDAQ:SIRI), and Cisco Systems (NASDAQ:CSCO) are three stocks that have more upside than you probably think at current levels. As a bonus, they also pay out dividend that will probably top what your $500 would be earning in the bank.
The class act among warehouse clubs hasn't skipped a beat during the coronavirus crisis. Warehouse clubs are considered essential businesses, and if you hit up your local Costco as it opens, you'll probably find yourself at the end of a line to get in.
Net sales rose 10.5% to hit $38.3 billion in Costco's fiscal second quarter, fueled primarily by a nearly 9% year-over-year surge in comps. Same-store sales for the March — when the economy starting winding down — actually accelerated at Costco.
A lot of companies are slashing their payouts in this climate, but that's not the case here. Costco actually increased its quarterly distributions from $0.65 to $0.70 per share two weeks ago, something that it has done every year since initiating a dividend policy in 2004. The current yield of 0.9% may not seem very exciting, but Costco has been known to sprinkle in some one-time bonus dividends along the way.
Sirius XM Radio
Satellite radio has defied the odds. Sirius XM keeps growing its base of paying subscribers despite the growing number of cars with Bluetooth-enabled features to let folks seamlessly stream audio from free or nearly free apps. Sirius XM moved higher after posting solid financial results on Tuesday.
Pro-forma revenue rose 5% for the first quarter, a period worth noting since a lot of people stopped driving their cars as much as they used to during the last couple of weeks in the quarter. Sirius XM did post a sequential dip in revenue, but that's not problematic. This happens seasonally at Sirius XM, as revenue has reported a sequential decline on the top line during the first quarter in four of the past six years.
Self-pay subscribers are now topping 30 million. Sirius XM matches the modest 0.9% yield that Costco is packing, and like the warehouse club operator this is another company that has boosted its quarterly dividend every year since it started paying them out, which in this case only dates back to 2016.
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One of the more interesting tidbits when it comes to Cisco is that for a brief moment in time — just before the dot-com bubble popped in a sudsy mess two decades ago — it commanded the country's largest market cap. The internet revolution was in its infancy, and demand for Cisco's routers and switches was booming.
Things have slowed down for Cisco. You have to go back a decade to find the last time it posted double-digit revenue growth, but one has to like Cisco's chances of coming out ahead in the new normal. With so many people working from home these days, upgrading their networking gear is going to be a big driver for Cisco.
Cisco also happens to command the beefiest payout on this list, currently yielding 3.3%. It's good for the money, and it has beaten Wall Street's profit targets in each of the past four quarters.
Warehouse clubs, satellite radio, and networking equipment may not be areas where you were expecting to put your $500 to work, but these are resilient and niche-leading dividend stocks that should serve long-term investors well.
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