Ran a basic screen for stocks with a dividend yield over 4%, payout ratio under 50% (to judge the sustainability of current dividend and chance the dividend can rise) and the distance from the 52-week low <5%. Then I screened by volume to weed out thinly traded stocks.
$ALLY jumps out from the list. 4.61% dividend yield, only a 10.70% payout ratio (lots of dividend safety, w room for increases), only 4.75% above the 52-week low.
There are concerns about their reserves should a recession cause a lot of defaults. But it sure seems as if the market is pricing in a ton of downside. ALLY trades at a large discount to the big banks (a P/E under 5, and trading for less than book value)
Analyst targets (for what theyre worth) place the upside of the stock at more than 35%. According to BofA, their target actually is pricing in a recession.
Is it a sexy play? No. But it feels like a solid dividend, at a good price, with good upside. It's a small part of my IRA portfolio.
Any counter-opinions? Feels like I'm missing something here.
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