Three Dividend Stocks Experiencing Declines of 8%, 16%, and 37% as Potential Buys in December
In the current market landscape, while major stock indexes seem to be hitting all-time highs, several industries have faced their fair share of challenges this year. One such sector is upstream exploration and production (E&Ps), with companies like Devon Energy (DVN, down 15.5%) and APA Corporation (APA, down 36.8%) experiencing significant drops. Meanwhile, retail giant Target (TGT, down 51%) has tumbled after reporting third-quarter earnings, plunging past its year-to-date gains.
Despite these setbacks, these three dividend stocks—Devon Energy, APA Corporation, and Target—present remarkable opportunities for investors considering a buy in December.
Devon Energy: The Invisible Opportunity
Devon Energy may appear to be losing favor among investors, as its stock has dropped 15.5% so far this year. However, the company’s cash flow generation is impressive, enabling it to pay dividends, reduce debt, and repurchase shares. Management has also acquired assets this year, such as Grayson Mill Energy and strengthening its position in the Permian region, improving overall productivity.
The company has the potential to increase its dividend significantly due to forecasted free cash flow in the range of 9% of its market cap if oil prices remain high. However, investors seem to be overlooking these positive factors, making Devon Energy an enticing buy opportunity in December.
APA Corporation: The Oil Revival
APA Corporation's stock is currently trading at a discount to its historical valuation, plunging 36.8% this year. The company acquired Callon in April, resulting in significant cost synergies and increased acreage in the Permian Basin. Integration of Callon is expected to create $225 million to $250 million in cost savings.
Although APA has faced concerns about its operations in the North Sea, skeptics may be underestimating its potential. With shares trading at 1.9 times its operating cash flow, a discount to its five-year average, now is an excellent time to buy into the oil patch with APA stock.
Target: The Undervalued Retail Giant
Target stock has dropped 21.4% in a single session after reporting third-quarter earnings and still faces a 51% fall from its all-time high. However, its 2024 adjusted earnings per share reach $8.60, which is higher than its dividend payment, equating to a 3.4% yield. Despite recent challenges, Target’s long-term strategy remains intact, continuing investment in e-commerce, curbside pickup, and other omnichannel strategies, making it a compelling Dividend King to consider buying in December.
Incorporating Enrichment Data
While Devon Energy’s counter-cyclical potential and APA Corporation’s stable dividend history are significant factors, targeting these stocks primarily for their income-generating capabilities is crucial. Target, in particular, continues to offer a compelling high dividend yield compared to other retail stocks. Its stable business model and history of consistent dividends waste little risk.
Leveraging these insights, investors can make informed decisions when considering adding Devon Energy, APA Corporation, or Target stocks to their buy list during December.
Investors looking to diversify their finance portfolio might find Devon Energy's current situation appealing, as the company's impressive cash flow generation and potential for significant dividend increases could make it an attractive investment opportunity, especially in December.
With Target's stock trading at a lower price after its third-quarter earnings report, investors might consider this as an opportunity to buy into the undervalued retail giant, given its high dividend yield and robust long-term strategy in the e-commerce sector.
