2 cheap dividend stocks to consider

IInvesting in stocks that pay dividends can be a good way to generate income. Additionally, companies that pay dividends tend to be more mature, offering stable earnings and cash flow, characteristics that can make an investment less risky.

Target (NYSE: TGT) and eBay (NASDAQ: EBAY) might be good candidates if you are looking for dividend paying stocks to add to your portfolio. Both flourished during the pandemic and are also expected to hold up during economic reopenings.

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Target

Ranked the seventh largest retailer in the United States, Target has had a record dividend increase every year since 1971. Such a long history of distributing growing dividends can make an investor more confident in the stability of a company. Recently, Target announced a 32% increase in its quarterly dividend to $ 0.90 per share. That works out to $ 3.60 per share per year if he continues at that rate, compared to $ 2.68 he paid in fiscal 2020. The dividend yield is 1.45%, higher than 1.29% of the S&P 500.

The company flourished in fiscal 2020, increasing its sales by 19.8%. The momentum continues into 2021 as Target continues to optimize the business. Rolling out same-day fulfillment services for orders that start online – then are picked up in person or delivered for a fee within hours – has been popular with consumers and represents a rapidly growing share of sales. It’s important to note that when a customer chooses one of these options, it costs Target much less than shipping the item to the customer’s home.

The trend is manifested in the results. Management estimates that Target will post an operating profit margin north of 8% for fiscal 2021. That would be the company’s highest in at least 10 years.

The market has noticed and the stock is up 40% in 2021. Still, Target’s stocks aren’t expensive. Trading at a forward price / earnings ratio of 19, its stock is relatively well valued.

eBay

While eBay hasn’t paid dividends for as long as Target, it can still be a good move to consider. Like Target, the company did well during the pandemic, but for different reasons. People looking to avoid going to physical stores have taken to the company’s website for some of their shopping needs.

EBay’s business model brings together buyers and sellers of items in its online marketplace. The company takes a commission on each transaction. It does not operate order processing facilities and does not have inventory. This policy allows eBay to generate a high profit margin. Indeed, over the past decade, eBay has averaged an operating profit margin of 23.9%. Companies with thin assets, like eBay, and generating a high profit margin, like eBay do, make excellent dividend stocks.

For the three months ended June 30, eBay paid investors dividends of $ 0.18 per share, up from $ 0.16 a year earlier. On an annual basis, eBay’s dividend will rise to $ 0.72, giving it a 0.95% dividend yield – and the company’s excellent profit margin could allow it to increase those payments. long-term dividends.

Fortunately for investors, the stock is inexpensive. It is trading at a forward price / earnings ratio of 19.6. In fact, Target and eBay are good values ​​for dividend investors at current prices.

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Parkev Tatevosian does not have a position in any of the stocks mentioned. The Motley Fool recommends eBay and recommends the following options: $ 70 short calls October 2021 on eBay. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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