With falling stock prices, valuations have come down significantly in 2022 and some stocks are downright cheap. But among the benefits of falling stock prices is the fact that dividend yields move in an inverse relationship with stock prices — at least when payouts hold up. As such, investors today can buy attractive income streams at very cheap prices.

Three dividend stocks trading at favorable levels these days are Dynamic Douglas (PLOW 2.28%), Kinder Morgan (KMI 1.28%)and Enterprise Product Partners (EPD 1.21%). Here’s why our contributors think these will be great buys in August.

The supply chain will eventually be fixed

Reuben Gregg Brewer (Dynamic Douglas): Selling and installing commercial work truck attachments and equipment (like snow plows) may not sound exciting, but Douglas Dynamics’ dividend yield is as high as it’s been. in about five years. And given that its streak of annual payout increases has been going on for more than a decade, this news should be at least a little exciting. Moreover, at around 3.9%, its dividend yield is significantly higher than the stock’s five-year average of around 2.9%. For reference, a S&P500 An index fund will only give you a return of around 1.5% today.

The problem seems to be that this industrial company is facing headwinds in the supply chain, just like many other companies. She can’t get the parts she needs to keep up with demand, which impacts sales. However, management reports that its backlog remains strong and is sticking to its full-year guidance, suggesting that management believes this weak point is a temporary issue. To be fair, its adjusted loss of $0.11 per share in the first quarter was quite small, but it faced a tough comparison to the first quarter of 2021, and the first quarter is generally weak in this highly seasonal business. (Snowplows are usually sold before the snow season.)

Given that the global supply chain still seems to be in flux, investors shouldn’t discount the possibility of Douglas Dynamics delivering more bad news. But those willing to think long-term might consider an opportunity to buy a reliable dividend-paying stock at a discount.

Scrape the bottom of the barrel

Matt DiLallo (Child Morgan): While shares of Kinder Morgan have risen by double digits this year, they are still incredibly cheap. Thanks to that stronger than expected results and increasingly optimistic outlook, natural gas pipeline giant now expects its 2022 cash flow to be around 5% higher than its original forecast. That would put its distributable cash flow per share at around $2.17 for the year. With the stock recently trading at around $18, Kinder Morgan is trading at around 8 times its forward free cash flow.

It’s very cheap for a company with its profile. The large mid-tier company produces stable cash flows supported by long-term contracts and government-regulated pricing structures, has a strong balance sheet and increasingly visible growth prospects.

Whereas Kinder Morgan management not happy with share price, they can’t do much except execute the business plan. The strategy calls for the company to continue to allocate its abundant cash flow to paying attractive and growing dividends, investing in high-yielding expansion projects and buying back shares opportunistically. Kinder Morgan has done all three this year. It increased the dividend by 3%, approved new pipeline expansion projects, strengthened its renewable natural gas business and repurchased 16 million shares while bolstering its already strong balance sheet.

Since Kinder Morgan is trading at such a cheap valuation, it offers investors a dividend yield of over 6%. With a strong balance sheet and cash-generating activity, this payout is rock solid, making it a great buy for investors looking for income in August.

A boon for income investors

Neha Chamaria (Enterprise Product Partners): Enterprise Products Partners increased its dividend by 5.6% in early July, making it its 24th consecutive year of increased distributions. This dividend growth was supported by its steadily increasing cash flow. In fact, the oil and natural gas pipeline giant generated record distributable cash flow of $1.8 billion in the first quarter, which covered its dividend by a comfortable 1.8 times. Indeed, this was the highest payout coverage ratio on record for enterprise product partners, so one would expect the stock to be trading at a premium at this time.

Far from there.

Shares of Enterprise Products Partners are more than a third off their 2014 all-time high and trade at just 6.8 times its free cash flow, significantly below its five-year average. Its current share price yield is a solid rock of 7.3%, and management is committed to increasing the payout further.

Equipped with cash and without significant debt maturing until at least 2026, enterprise product partners can strike a balance between investing in growth and returning capital to shareholders. It has capital projects worth nearly $4.6 billion under construction, and anything the company earns beyond what is needed to fund its growth will likely end up in the pockets of shareholders in the form of dividends and share buybacks.

The best part is that Enterprise Products Partners’ fortunes aren’t as tightly tied to unpredictable crude prices as upstream oil companies, so investors can earn reliable, growing income without exposing their portfolios directly to swings in the oil market. So if you’ve been watching the rally in oil stocks but prefer to take a more cautious approach to getting involved, Enterprise Products Partners could be your cheap dividend stock right now.

Matthew DiLallo holds positions at Enterprise Products Partners and Kinder Morgan. Neha Chamaria has no position in the stocks mentioned. Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool holds positions and recommends Kinder Morgan. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.