Want to buy a good dividend stock and secure a great price in the process? I have a list of three stocks that can help you diversify your portfolio, allow you to earn above-average dividends, and score some potential bargains in the process.
Three stocks that are trading at attractive valuations right now that you may not want to overlook are Bristol Myers Squibb (BMY -3.29%), United Parcel Service (UPS -2.50%), and Dell Technologies (DELL -7.33%). Here's a closer look at why these stocks may be great buys.
Bristol Myers Squibb
Pharmaceutical giant Bristol Myers Squibb is trading at a significant discount; you can buy the stock at a forward price-to-earnings (P/E) multiple of just 9, which is based on analysts' estimates. By comparison, the average stock in the S&P 500 trades at 21 times its future profits.
There are a couple of reasons investors are likely bearish on the stock. The first is that it's facing multiple patent cliffs in the near future. Second, it has a high debt load; as of the end of 2024, the company's long-term debt totaled $47.6 billion. That looks enormous when you consider its cash and marketable securities totaled just $11.2 billion. But its short-term debt (what's due in the year ahead), totals just $2 billion.
Meanwhile, the company has been investing in its growth. In the past year, it has secured two key approvals -- one for schizophrenia drug Cobenfy, and another for cancer treatment Breyanzi. Both are potential blockbuster drugs that could generate billions in revenue for Bristol Myers Squibb.
The company's dividend is still well-supported with strong financials. Its free cash flow last year totaled nearly $14 billion, which is well above the $4.9 billion it paid out in dividends, making its 4% yield an attractive option for dividend-focused investors to consider right now.
There is some risk with the stock but with more growth on the horizon, the business looks to be in fine shape moving forward. And given the heavy discount, Bristol Myers Squibb's low price should also give you a decent margin of safety.
United Parcel Service
United Parcel Service, better known as UPS, has fallen 25% over the past year, pushing the stock's valuation down to a forward P/E multiple of less than 15.
The logistics company has been struggling to generate much growth in recent years and unfortunately, concerns about tariffs and trade wars could make this a vulnerable stock to be holding in the near future. If there's a recession and a slowdown in trade, that will result in less business for UPS.
However, UPS stock still makes for a top pick in the long run. It's a leader in logistics and although business isn't exactly booming, it's still profitable, with UPS reporting $5.8 billion in profit last year, on revenue of $91.1 billion. Its payout ratio is around 100% but the company's free cash flow totaled $6.2 billion last year, ahead of the $5.4 billion it paid out in dividends.
The payout still looks safe, and that can make this a popular stock for income investors to consider, given its high yield of 5.7%.
Dell Technologies
One stock that both dividend and growth investors might want to consider buying today is Dell. The computer company trades at an incredibly low forward P/E multiple of 10. It has a huge growth opportunity ahead in artificial intelligence (AI) as it waits for what may be an inevitable upgrade cycle for computers, with support for more than 1 billion Windows 10 devices coming to an end later this year.
Its server and networking business remains strong with Dell reporting 54% sales growth in that area of its operations in the most recent fiscal year (it ended Jan. 31). AI-powered PCs could result in even more growth ahead for Dell, which is why this has the potential to be a phenomenal growth stock.
The stock's 2.2% dividend yield is the lowest on this list but it offers a good balance for investors, as Dell's modest payout ratio of 28% puts it in an excellent position to pay a dividend while still pursuing growth opportunities in AI.
