The Top Dividend Stock You’ve Probably Never Heard Of
It offers a high yield, is a great value, and has a catalyst for growth.
Dividend stocks have seen significant inflows this year, particularly in the past few months after President Donald Trump increased tariffs on imports. Investors view dividend stocks as safe havens of sorts, because they are typically those of established, stable companies.
However, dividends are also popular during turbulent markets because the additional income from dividends can boost the total returns for stocks.
One of the best dividend stocks to buy right now is from a company you’ve probably never heard of that not only pays out a high-yielding dividend but has significant upside for returns. That stock is Omnicom Group (NYSE:OMC).
What is Omnicom Group?
Omnicom Group is a marketing, public relations, and advertising conglomerate based in New York that operates in 70 countries. Its affiliates include Flywheel, BBDO, and OMD to name a few.
The stock currently pays out a healthy dividend of 70 cents per share at a high yield of 3.91%. The yield, which is the percentage of the share price that goes to the dividend, is about three times the average dividend on the S&P 500. The higher the yield, the higher the dividend payout will be in relation to the share price.
So, Omnicom is trading at about $73 per share. If you invested $5,000 in this stock, you’d have about 70 shares, with each paying out 70 cents per quarter and $2.80 per year. Thus, you’d generate about $196 annually from the dividend, which could be reinvested back into the stock.
By comparison, a stock like BlackRock pays out a much higher dividend, $5.21 per share each quarter and $20.84 per year. But its share price is almost $1,000 per share, so you could only buy 5 shares for $5000. With a lower yield of 2.11%, that $5,000 investment would only result in about $105 in dividend income per year.
Why Omnicom is a good dividend stock right now
Omnicom has a steady dividend that it has maintained for the past four-plus years, and it has not lowered its dividend since 2007.
But it recently acquired a rival, the Interpublic Group of Companies (NYSE:IPG), in a deal it expects to close on in the second half of this year. The acquisition makes it one of the largest advertising companies in the world, as both are considered “big six” firms.
IPG also has a ridiculously good dividend, with a yield of 5.72% and a payout of 33 cents per share at a share price of around $24 per share. It has also raised its dividend each year for the past 12.
Omnicom management said they will continue, after the merger is finalized, to use its free cash flow on dividends, along with acquisitions and share repurchases.
Wall Street analysts are bullish on Omnicom stock, setting a median price target of $100 per share an rating it a consensus buy. A $100 share price would suggest a 38% return for the stock over the next 12 months.
Currently, Omnicom stock is trading at about $73 per share and is down roughly 15% year-to-date. But it is ridiculously cheap, trading at just 9 times earnings, putting it in value stock territory. With its high-yield, its commitment to the dividend, and the merger as a growth catalyst, Omnicom Group looks like an excellent dividend stock right now.
This post originally appeared at ValueWalk.
Category: Dividend Stocks To Buy?
