3 Dividend Stocks to Buy on Sale

6 months, 2 weeks ago - March 15, 2022
3 Dividend Stocks to Buy on Sale
Investors are pricing in the downside for banking stocks from here, but ignoring one major tailwind. Consumers are ready to start dining out again regardless of the environment and backdrop.

The market's rout since the end of last year hasn't just hurt growth stocks. Plenty of value names and dividend payers have been upended as well. Indeed, no sliver of the market has proven immune to this year's sweeping selling.

If you're an income-minded investor, though, this broad pullback is an opportunity to jump into some solid dividend-paying stocks on the cheap. Here's a closer look at three of your best bets right now.

V.F. Corporation

Current dividend yield: 3.8%

V.F. Corporation may not be a household name itself, but you're probably well aware of its brands. V.F. Corporation is the company behind apparel from Timberland, Dickies, The North Face, Jansport, Vans, and more. The clothing business can be lucrative, but it requires scale -- even if that scale is achieved by assembling several brand names under one roof.

It's been a wild past couple of years on this front. Consumers' apparel preferences are always changing anyway, and the pandemic largely wiped out demand for clothing other than the ultra-comfortable stuff people started wearing while sheltering from COVID-19 by staying home.

It remains to be seen just how much we'll pick up our pre-pandemic dressing habits now that an end to the pandemic seems to be in sight. By and large, though, this stock's 40% slide since its early 2021 high indicates investors think uber-casual wear will remain en vogue.

V.F. Corporation's past and projected numbers, however, suggest that's not the case. The company recently affirmed that its revenue for the fiscal year ending this month is on pace to be 28% stronger than the prior year's tally, and analysts are calling for still-respectable top-line growth of more than 7% in the coming year. That's not bad at all in light of the fact that brick-and-mortar retailing (and department store retailing in particular) remains on the defensive.

Better still, V.F. is still more than profitable enough to support its dividend. Fiscal 2022's earnings are projected to roll in at $3.21 per share, vs. trailing 12-month dividend payments of $1.95.

Darden Restaurants

Current dividend yield: 3.6%

Between soaring inflation, a rekindled pandemic, and the current conflict in Ukraine, it's not a complete shock that Darden Restaurants shares are nearly 13% lower for the past month; that's actually better than the 18% sell-off that the shares were nursing just a few days prior. Investors don't know what sort of headwind Darden may be on the verge of running into -- or when it may run into it -- but the crowd seems pretty certain the restaurant chain is vulnerable.

It's a worry, though, that's arguably overblown. Largely lost in the thinking is just how ready consumers are to venture out and rekindle their pre-pandemic norms. Most everyone altered their habits at least somewhat during the past couple of years in an effort to steer clear of coronavirus risks. Many people dramatically curtailed most of life's niceties like regular visits to restaurants.

Now they're ready to resume those habits. According to data regularly gathered by Morning Consult, as of a week ago 74% of U.S. adults are now comfortable dining at a restaurant, with 71% of U.S. adults OK with doing so indoors rather than outside. Both are the highest readings seen since Morning Consult began collecting this sentiment data in April of 2020.

In other words, at least the COVID-19 infection-risk aspect of consumer worry isn't actually a worry. Rising food prices don't actually seem to have crimped dining interest either as in some ways dining out is actually a cost-effective alternative to cooking at home.

Citigroup

Current dividend yield: 3.7%

Finally, add Citigroup to your list of dividend stocks you can buy on sale right now. Citigroup isn't a complicated company. It makes the bulk of its money by extending loans to borrowers, and tacks on revenue by offering ancillary services like brokerage and investment banking.

Citi shares have fallen almost 20% over the course of just the past month, largely on concerns that a wobbly economy and rising interest rates would crimp demand for new loans. It wouldn't exactly help its investment-related businesses either.

Investors, however, may be looking at things backwards. While soaring interest rates that don't keep inflation in check may limit interest in borrowing, the Federal Reserve looks like it's going to take a more measured approach to ratcheting up the federal funds rate.

The Fed's Open Market Committee estimates it will be imposing between eight and nine quarter-point hikes going forward. But it also intends to take it slowly, evenly pacing those rate hikes over the course of the coming three years. That's survivable. It may also be beneficial to Citigroup.

The stock's recent weakness also suggests the market is ignoring the fact that higher interest rates make the business of lending a more profitable, higher-margin one. It certainly bodes well for Citi's dividend which, at $2.04 per share, only consumed about a fifth of last year's per-share operating earnings of $10.14. This translates into plenty of payment flexibility should rising rates create some temporary turbulence for the lending market.

We also recommend