2 Solid 5% Dividend Stocks to Buy Right Now

That was quick. The S&P 500 has recovered from the first quarter’s atrocious losses that put it into correction territory, and on June 27, the benchmark index set a new all-time high. Indeed, panicking as stocks take a turn lower is never a good idea. And while it feels so much better to buy stocks at higher valuations despite a growing list of potential threats, I’d encourage investors to play things cautiously, especially since a lot of investors may be ignoring the very real risks that had the masses selling between February and April.

Though there’s real opportunity in the fast-recovering AI stocks that are leading global markets higher, I’d not pass up on the dividend plays, especially those that yield close to 5% with betas with valuation metrics on the low end of the range. In this piece, we’ll consider a pair of names that seem worth buying right now for income-oriented investors who are having trouble finding value in this blistering April-to-June market comeback that could stay hot as we head into mid-summer.

Key Points in This Article:

• General Mills is undervalued at a TTM P/E multiple of 12.2 while paying a dividend yielding 4.81%.
• Wendy’s is also undervalued at a TTM P/E multiple of 12.5 while paying a dividend yielding 4.72%.
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General Mills

General Mills (NYSE:GIS) is a relatively unexciting consumer-packaged goods (CPG) company that recently hit new multi-year lows, trading just north of $50 per share. Indeed, the cereal maker has seen sales fall under pressure amid inflation and other consumer-facing pressures. Undoubtedly, General Mills boasts a strong portfolio of brands (Cheerios, Lucky Charms, Cinnamon Toast Crunch, just to name a few) in the cereal section, but the generic rivals seem to have had the upper hand amid the horrific battle against price increases.

Top boss Jeff Harmening is fully aware of the issues plaguing shares of General Mills. He knows the firm needs to enhance its value proposition to break out of the latest sales slump. Mr. Harmening cited further investment efforts aimed at improving value, innovation, and the brand. Indeed, General Mills can continue investing in brand-building and new products as much as it likes, but until consumers perceive greater value, I’m not so sure they’ll be racing back to the middle aisle for a family-sized box of Cheerios.

Despite uncertainties in such a challenging consumer climate, RBC Capital’s Nik Modi thinks GIS stock is overdue for a relief rally of sorts. Indeed, the stock is starting to become severely oversold and undervalued.

And while Modi’s latest upgrade is encouraging, investors should be prepared to play the long-term game with the stock, as the consumer may not be so quick to load up their shopping carts in the medium term. Not with all the inflation and economic headwinds out there. For now, the 12.2 times trailing price-to-earnings (P/E) ratio and 4.81% dividend yield should be sweet enough for patient investors. 

Wendy’s

Wendy’s (NYSE:WEN) is another deep-value stock with a generous dividend yield (4.72% at the time of writing) that’s close to multi-year depths. At $11 and change, Wendy’s goes for just 12.5 times trailing P/E. After slashing its dividend just a few months ago by around 44%, investors can feel a bit better about the new well-supported payout. Of course, the fast-food scene has faced a plethora of hurdles in recent quarters, thanks in part to inflation-weary consumers. 

With a big-name analyst, Rahul Krotthapalli, over at JP Morgan recently upgrading the stock to overweight, though, there’s reason for hope. He’s a fan of Wendy’s valuation and the potential for its free cash flow yield to rise in the next few years. I couldn’t agree more with Krotthapalli.

Indeed, Wendy’s has been down and out for way too long. And with new product innovations, like the Frosty Fusions, as well as a revamped value menu, there is the means for WEN stock to climb higher again. Add AI drive thrus and the longer-term expansion plan into the equation, and I think WEN stock becomes very tough to ignore any longer. It has the sales and margin growth cards that I suspect it will play well as it rides out the rest of its tailspin to an eventual bottom.

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