2 Stocks That Look Dirt Cheap in 2024

We’re one month into 2024, and the stock market is in full-on bull mode. The S&P 500 index has climbed roughly 2.5% year to date and gone on to set new record highs.

But even though the benchmark index is now up roughly 20% over the past year, there are still some great stocks trading at big discounts and offering investors paths to scoring huge wins.

If you’re looking for top stocks that trade at very cheap prices in today’s bull market, read on to see why AT&T (NYSE: T) and StoneCo (NASDAQ: STNE) stand out as two great buys right now.

1. AT&T

While AT&T’s stock price is up roughly 3% so far in 2024, it’s still down approximately 13% over the past year. More strikingly, the telecom’s share price is down roughly 42% from its five-year high. The stock looks like a great buy for investors seeking high-yield dividend stocks.

Even though AT&T cut its dividend 46% to an annual payout of $1.11 per share in 2022 and has kept it steady at that level, declines for the company’s share price have had the effect of pushing its dividend yield up to attractive levels. Shares also trade at low earnings multiples.

T PE Ratio (Forward) Chart

Trading at under 8 times this year’s expected earnings and offering a 6.4% dividend, AT&T stock is a cheaply valued standout for investors seeking passive income. Of course, the company’s hefty dividend yield at today’s prices won’t mean much if management carries out another substantial payout cut. But AT&T’s current distribution actually looks quite safe.

Aided by efficiency initiatives and sales that are shifting toward its more profitable wireless phone and broadband businesses, AT&T grew its free cash flow (FCF) by 18% annually to $16.8 billion last year. For 2024, the company expects to post FCF between $17 billion and $18 billion. At the midpoint of its target for this year, FCF generation would be enough to cover the current dividend more than twice over.

2. StoneCo

StoneCo is a Brazil-based fintech that provides payment-processing services and other offerings. The company’s stock saw huge sell-offs in 2021 as issues emerged with the company’s lending business and investors pivoted aggressively away from fintech companies with growth-dependent valuations.

Due to pandemic-related issues related to the Brazilian national registry system that StoneCo had been using to determine whether business applications were creditworthy, the company wound up taking big losses on bad loans in its portfolio. It also temporarily suspended issuing new loans to applicants.

Even after a recent rally on the heels of some strong business results, StoneCo’s share price is down approximately 81% from its high. There’s a lot to like about the business and stock right now.

It has once again started to offer new loans through its credit unit, but the payment-processing business remains the star here — and it’s powering stellar results. The total number of customers using its payment platform grew 40% year over year to reach 3.3 million in the third quarter, and the company also increased its average transaction fee to 2.49% from 2.21% in the prior year period.

Overall revenue increased 25% year over year in the third quarter, and adjusted income skyrocketed 302%. With shares trading at just 14.3 times this year’s expected earnings and 2.1 times expected sales, StoneCo has the makings of a dirt-cheap growth stock at current prices.

STNE PE Ratio (Forward) Chart

STNE PE Ratio (Forward) Chart

In addition to strong sales and earnings growth, the company also has an excellent balance sheet. StoneCo closed out its last reported quarter with a net cash position of roughly 4.3 billion Brazilian reals (roughly $870 million). With its market cap sitting at roughly $5.7 billion, StoneCo stock has explosive upside potential.

Should you invest $1,000 in AT&T right now?

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Keith Noonan has positions in AT&T and StoneCo. The Motley Fool has positions in and recommends StoneCo. The Motley Fool has a disclosure policy.

2 Stocks That Look Dirt Cheap in 2024 was originally published by The Motley Fool