Whether you're worried about a market crash, a lengthy recession, or just want to see money coming into your portfolio every few months, dividend stocks can be great options to hold for the long term. In general, the stocks that offer dividends are stable investments that can afford to distribute money out to shareholders on a regular basis.
But the average yield on the S&P 500 is just 1.6%, and investors can do a whole lot better than that without taking on much risk. Three stocks that pay a yield more than 3% and are good buys today are PetMed Express (PETS -1.90%), Cisco Systems (CSCO -0.62%), and Village Super Market (VLGEA -1.59%).
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1. PetMed Express
PetMed operates pet pharmacies in the U.S. under the 1-800-PetMeds brand. Its focus on health products for pets can make it a fairly stable stock to invest in, given the need for ongoing care. And consumers have been seeking more companionship amid COVID-19 lockdowns. According to Better Cities for Pets, 1 in 3 pet owners got a pet during the pandemic.
The Florida-based PetMed Express has been benefiting from the growing demand for its products and services. On Jan. 19, it released its third-quarter results for the period ended Dec. 31, 2020, where sales of $65.9 million grew 10% from the prior-year period. And over the trailing nine months, revenue of $237.5 million rose 13.2%. Those strong numbers have trickled down to the bottom line with PetMed reporting a year-to-date profit of $23.8 million, 26.2% higher than in the previous year.
Currently, the stock pays a quarterly dividend of $0.28, which yields 3.2%. And with a payout ratio of 73%, PetMed is in a great position to continue making dividend payments for the foreseeable future. In the past year, the stock has soared 61%, outperforming the S&P 500, which is up just 16% during that time frame.
2. Cisco
Tech giant Cisco is another good option for dividend investors. It also pays 3.2% right now and its payout ratio of 58% is even more sustainable than PetMed's. Although its shares are down 8% in the past year, this could be one of the more underrated buys on the market right now. Cisco provides businesses with important IT infrastructure, including routers, firewalls, and products that can help companies stay connected and secure, especially as more employees work remotely.
In the company's first-quarter earnings report of fiscal 2021, which it released on Nov. 12, 2020, sales for the period ended Oct. 24, 2020 totaled $11.9 billion and were down 9.3% from the prior-year period. However, the company is optimistic that in the second quarter, its top line will be down no more than 2% from where it was a year ago. The problem is many businesses are still scaling back their expenses and refraining from any service upgrades, especially since the pandemic is still far from over. That means keeping costs down is important, at least until the economy is in much better shape. And so it may not be surprising that while Cisco's product revenue declined by 13.1% during the period, its service segment showed some resiliency, rising 1.9% year over year.
At a price-to-earnings (P/E) multiple of 18, Cisco's shares look cheap right now. By comparison, the average stock in the Technology Select Sector SPDR Fund trades at more than 35 times its earnings. With a good yield, a cheap valuation, and a business that could rally as the economy gets stronger, Cisco could be a great under-the-radar dividend stock to pick up today.
3. Village Super Market
If you're looking for safety amid the pandemic and for the long term, then you may want to consider investing in grocery stores. You're likely not going to see shares of Village Super Market soar this year -- in the past 12 months, the stock is down 3%. But what makes this an attractive buy for dividend investors is the stability and great payout it offers. Today, the stock yields 4.6% -- which handily earns the top spot on this list in terms of yield. Its payout ratio is also fairly low, coming in at just over 50%.
But there's also a growth angle that makes Village Super Market an even more attractive buy. Last year, the company bought some of Fairway's assets in a bankruptcy auction, including four Manhattan-based supermarkets. Village Super Market currently owns more than 30 grocery stores across New Jersey, Maryland, Pennsylvania, and New York, and its growing presence is translating into better financials.
It released its latest earnings results on Dec. 3, 2020, and for the first quarter, ended Oct. 24, 2020, sales of $490.1 million grew 20.3% from the prior-year period, mainly due to the new Fairway assets. However, the company also noted strong customer demand due to the pandemic as same-store sales grew 6.6%. Digital sales were also up 172% as shoppers opted for grocery pickup and delivery to avoid having to make in-store visits. The growth is important because it'll make the company's bottom line stronger -- in Q1, profits of $3.4 million were up 30.9%.
Even though the growth may not translate into a surging stock price, higher profits will make Village Super Market a much more stable investment over the long term. And although Village Super Market's P/E ratio of 12 is a tad high compared to both Albertsons and Kroger, which trade at around nine times their earnings, it makes up for that with a better yield (Albertsons and Kroger both pay a little more than 2%).
