Stocks that pay dividends can be great sources of passive income. With that in mind, here are three dividend stocks that I’m getting ready to buy as the new financial year brings a new ISA allowance. I think that each trades at an attractive valuation right now.
A FTSE 100 stalwart
Over the last decade, the company has grown its earnings per share at an average of 11% per year. Its distributions to shareholders have increased in line with its earnings.
It’s worth noting that the pandemic year was tough for Legal & General. Earnings dipped significantly in 2020. While they’ve recovered strongly in 2021, the ongoing coronavirus situation is still worth keeping an eye on from a risk perspective.
A 5G Buffett stock
My second dividend stock to buy in April is S&P 500 constituent Verizon Communications (NYSE:VZ). Verizon’s dividend yield currently comes in at around 5% and I think that the company has a bright future.
As I’ve mentioned elsewhere, Verizon’s earnings growth over the last 10 years has comfortably outpaced the broader index. While the share price has lagged, I believe that the result is a huge buying opportunity for investors like me.
Warren Buffett also agrees. The Oracle of Omaha bought Verizon stock between 2020 and 2021 at prices between $54 and $62. Verizon’s shares currently trade at $51.25, which is catching my eye at the moment.
Verizon has been spending big lately. The result is that the company has a lot of debt. How Verizon manages its debt will be worth watching, but I think there’s reason to believe that the risk from Verizon’s debt is offset by the stock’s low price.
Last on the list is Citigroup (NYSE:C). Unlike the others, Citigroup has not had a straightforward track record. Rather, it’s in the process of turning around its excessively complicated business.
At its last earnings report, Citigroup’s management announced plans to sell off 13 of its retail operations in different countries. In doing so, the company hopes to make itself more efficient by concentrating on its most lucrative opportunities.
I like the move, but it isn’t without risk. Selling off its franchises depends on finding buyers for them. It is also likely to incur fees. So Citigroup is probably the least straightforward of the dividend stocks I’m looking at for April.
Nonetheless, I believe that Citigroup shares are attractive at the moment. While the dividend yield is lower than the others, at just under 4%, the stock currently trades at a substantial discount to the company’s book value. I think that makes the stock an attractive buy for my portfolio at these levels.
Interest rates rising this year has put pressure on stocks with high valuations. In that environment, Legal & General, Verizon, and Citigroup all fared reasonably well. As tech stocks have recovered, however, the three stocks that I’ve mentioned here have settled down a bit. As a result, I’m getting ready to buy these cheap dividend stocks in April.