3 High-Yield Stocks at Rock-Bottom Prices

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Low share prices will lift the effective dividend yield on the same stock. That's why it's common to find high yields in a package deal with value-priced stocks. But those generous dividends often come with serious drawbacks.

We're here to help you find generous dividend payers trading at reasonable prices -- and with a solid chance of sticking around for the long term. Read on to see why a panel of your fellow investors would recommend Uniti Group (NASDAQ: UNIT), Compass Minerals International (NYSE: CMP), and Cypress Semiconductor (NASDAQ: CY) for their combinations of solid business, deep discounts, and fantastic dividend yields.

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Road salt for the win

Maxx Chatsko (Compass Minerals International): Large portions of the United States experienced unusually warm weather in back-to-back winters in recent years. While that was a reprieve for many, Compass Minerals was not enjoying the above-average temperatures. That's because the company is the leading producer of road salt and de-icing solutions in North America. Fewer snow events meant fewer opportunities to sell its products, which sapped revenue and earnings and led to a gradual decline of its share price.

The bad news is the stock is near five-year lows. The good news is the business is hardly in jeopardy and has continued to deliver solid earnings, which has resulted in a steadily rising dividend that now yields over 4%. The great news is traditional winter weather is back this year, just as several growth investments are about to make their presence felt.

In addition to mining salt for road and industrial applications, Compass Minerals offers a portfolio of fertilizer products and agricultural nutrients (fertilizers are often mined as salts, so there's a high degree of overlap for miners of one or the other) to farmers in North America and South America. The company recently expanded into the latter market to capitalize on a fast-growing customer base. Unfortunately, the timing was a bit off, as droughts and floods and tariffs have slowed down the highly coveted Brazilian agricultural market. But the headwinds are only expected to be temporary.

More importantly, Compass Minerals has managed to remain focused on the factors within its control. It has ambitious but attainable goals to increase operating margins for its three major segments by 2020. A massive $225 million upgrade to its salt mines will be completed in early 2018 and is expected to reduce operating expenses by $40 million per year. New product launches in the agricultural portfolio will help to boost profit margins in the next few years. And it appears that winter weather is once again cooperating. If the efforts pay off (and icy precipitation continues to fall), then this could be a high-yield dividend stock worth adding to your portfolio.

Almost ready to stand completely alone

Anders Bylund (Uniti Group): This manager of telecom infrastructure assets currently sports a dividend yield of 16.1%. That's rich enough that you have to take a step back and wonder if there's something fundamentally wrong with the company's business. In Uniti's case, the big issue is parent company and leading customer Windstream Communications (NASDAQ: WIN), which looks like a dead man walking.

This is a real risk, and Uniti shares are priced accordingly.

Windstream's telecom services business has been rickety for years. Spinning off its networking hardware and property under the Uniti REIT was supposed to give the service company a second wind -- a chance to regroup and rebuild a struggling business model.

Instead, the spinoff created a solid networking company with 4.8 million miles of owned or leased optical network fiber strands and nearly 700 wireless towers, selling access to these assets via long-term contracts with over 16,000 clients.

Windstream's sales are dwindling; Its earnings and cash flows are deeply negative. Uniti is the positive mirror image of Windstream's problems.

Sure, it would be nice if Windstream got its act together to give Uniti a dependable revenue source for the long run. The company does account for 70% of Uniti's total sales, after all. But that's a big shift from the 100% portion Windstream contributed just three short years ago, and the company is only digging deeper for further diversification.

Windstream may be marked for deletion on short notice, but Uniti should survive that disaster as a value-building company in its own right. Meanwhile, Uniti shares are priced as if it was destined for the same short, brutal future as the failing parent company. Today, you can buy Uniti shares at the bargain-basement price of 10 times EBITDA profits and 10 times free cash flow.

The Windstream risk is real, but it's not the end of the world. Uniti's fantastic dividends will be around for the long haul, even if Windstream goes gently into that good night.

An undervalued niche chipmaker

Leo Sun (Cypress Semiconductor): Cypress makes a wide range of embedded chips for cars, industrial machinery, consumer electronics, and other devices. It's the market leader in six high-growth niche markets -- Wi-Fi/Bluetooth combo chips for Internet of Things (IoT) devices, auto instrument cluster microcontrollers, auto NOR flash memory chips, SRAM memory chips, USB-C controllers, and other USB solutions.

Its core growth strategy, "Cypress 3.0," aims to turn the company into a "one-stop embedded solutions provider" for the IoT market. Last quarter, 80% of its revenue came from customers who purchase "two or more" product families -- indicating that Cypress is consistently growing its content share by bundling together chips.

Last year, Cypress' non-GAAP revenue grew 20% to $2.3 billion as its EPS jumped 82% on the same basis. The company attributed that growth to robust demand for its IoT, auto, and industrial chips.

Looking ahead, analysts expect those trends to respectively boost its revenue and earnings by 7% and 37% this year. Those are impressive growth rates for a company that trades at just 11 times forward earnings. Cypress also pays a forward yield of 2.9%, which is much higher than the S&P 500's current yield of 1.9%. Cypress hasn't hiked its dividend since 2012, since it allocates most of its capital toward acquisitions, but it's a nice added bonus for owning this undervalued chipmaker.

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Anders Bylund owns shares of Uniti Group. Leo Sun owns shares of Cypress Semiconductor. Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool recommends Compass Minerals and Cypress Semiconductor. The Motley Fool has a disclosure policy.

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