The markets have rallied since March's market crash but bargain hunters can still scoop up many cheap buys. The three stocks below have solid fundamentals, are good long-term investments, and also pay dividends. They've also all underperformed the S&P 500 in 2020, but that makes them even better buys right now.
1. CVS
CVS Health (CVS 1.49%) is a well-known name in healthcare and it isn't going anywhere. The pharmacy retailer's playing an important role during the COVID-19 pandemic: Not only is it helping people get their prescriptions, but it's assisting in testing people who are concerned they may have contracted the coronavirus. As of May 29, the company said it had 1,000 COVID-19 test sites set up across the country.
Image source: Getty Images.
CVS has also partnered with Nuro, which is an autonomous robotics company that will utilize self-driving vehicles to deliver prescriptions in the Houston, Texas, area. The two companies have partnered on an exciting pilot program that could pave the way for the future of pharmacy delivery. It's a great example of CVS' ability to adapt and provide more value to its consumers.
Customers are continuing to flock to the company's stores. On May 6, the Rhode Island-based healthcare company released its first-quarter results. Same-store sales were up 9% from the prior-year period. CVS saw incredible growth with home delivery prescriptions up 1,000% from the same period last year and virtual visits through its Minute Clinic service up 600%.
Now that CVS owns Aetna, a health insurance company, it's able to provide patients with more comprehensive healthcare solutions beyond products and services. That's why the stock is a great one to buy, even during these troubled times, as it provides essential services for patients.
Currently, CVS stock trades at a very reasonable 12 times earnings and 1.3 times book value. Typically, value investors look for price-to-earnings (P/E) multiples of 15 or lower while price-to-book (P/B) multiples of 1.5 or lower are ideal. In addition to the good valuation, CVS also pays investors a quarterly dividend of $0.50, which today yields 3%.
2. Wells Fargo
Wells Fargo (WFC 2.74%) and other financial institutions have been hit hard as a result of COVID-19. They've been heavily impacted by state lockdowns, which have decreased economic activity. That means the bank is issuing fewer transactions and loans while incurring more risk that its existing customers will default.
That's why it's no surprise that when the San Francisco-based company released its quarterly results on April 14, it noted that its profits had taken a hit. Not only did revenue of $17.7 billion fall short of the $19.3 billion that analysts were expecting from the company, but Wells Fargo also posted a minuscule profit of just $0.01 per share. The bank had to build up its reserves for the unstable economic times ahead, adding $3.1 billion in provisions for credit losses, which were the main reason for the stock's poor bottom line.
But over the long term, the bank's a good bet to come out of this pandemic. The sooner the economy reopens and gets back to where it was, the sooner Wells Fargo's stock will recover. And although that may still be a year or two away from becoming a reality, that makes buying the stock now an attractive idea.
Like CVS, investors can buy Wells Fargo at a bargain. Currently, the stock's trading at 10 times its earnings with a P/B multiple of 0.7. It's also a great opportunity to grab a high yield, as the bank is still paying a quarterly dividend of $0.51, which today yields around 7.5%.
3. FedEx
FedEx (FDX 1.37%) opens up a third industry for bargain-hunting investors. The logistics company was popular as online sales were growing and it may become even more crucial to the economy's future. Even once the COVID-19 pandemic's over, many consumers are still likely to be hesitant to shop in store, making online shopping vital to the economy's recovery.
That's where investing in Fedex could be a very strategic move for investors to make today. The company released its most recent quarterly results on March 17, when the pandemic was still in its early stages. FedEx will release its year-end results on June 30, which will give investors their first look into how the company's results look amid COVID-19.
Over the past 10 quarters, FedEx has failed to post a profit only once. In the company's third-quarter results, which Fedex released on March 17, sales were up 2.8% from the prior-year period, although year-to-date sales were flat. But that should change in the fourth quarter as FedEx could have a strong finish to the year.
The stock is currently trading at a P/B multiple of 1.7 and its forward P/E is 12. Its quarterly payout of $0.65 yields 2%, which is in line with what investors can expect from the typical S&P 500 stock.
Which stock is the best bargain today?
All three stocks have had rough starts to 2020, with Wells Fargo seeing the steepest decline -- its share price is now half of what it was at the start of the year.
The big bank stock looks to be the most appealing bargain of the three listed here, especially if dividend income is important to you. But if you're looking for some capital gains this year, FedEx may be the best option right now. While Wells Fargo will likely recover, FedEx may rally a lot sooner, especially if it releases strong fourth-quarter results in June.
