Please ensure Javascript is enabled for purposes of website accessibility

Got $5,000? These 2 Dividend Stocks Are Dirt Cheap Buys

By David Jagielski – Sep 2, 2021 at 9:30AM

Key Points

  • Viatris and Suncor are trading at forward price-to-earnings multiples in the single digits and are bargain buys.
  • As well as these companies are doing right now, they could perform even better in future quarters.
  • Strong financials put these companies in a good position to continue making dividend payments.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

And their yields are both over 3%.

Many Americans have been saving up money during the pandemic with fewer places to spend amid lockdowns and restrictions. And if you have $5,000 that you can afford to invest right now, there are a couple of promising dividend stocks that you should consider buying.

Healthcare company Viatris (VTRS -1.64%) and oil and gas stock Suncor Energy (SU -1.00%) are two incredibly cheap dividend investments that you can buy and hold. With payouts that are above average and investors not paying much of a premium for either of these businesses, this could be an ideal time to invest in both.

A man smiling and reviewing his finances.

Image source: Getty Images.

Viatris

Pennsylvania-based Viatris was born last year when healthcare giant Pfizer spun off its Upjohn business (which contained many of its legacy products), which then joined with another healthcare company, Mylan. Although the business has been incurring losses for the past three quarters, Viatris has reported free cash flow of $1.3 billion over the trailing 12 months.

Plus, the losses are a bit misleading given that the company is still incurring many acquisition-related expenses and fair-value adjustments. For the three-month period ended June 30, Viatris reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.2 billion. It projects that for 2021 its adjusted earnings will come in at about $6.3 billion, up from earlier guidance of $6.2 billion. Net revenue of $4.6 billion this past quarter was 3.7% higher than the previous period.

Management is most excited about the recent approval of its diabetes medicine, Semglee. The Food and Drug Administration has approved it as an "interchangeable biosimilar" so that patients can use it as a substitute for Sanofi's higher-priced insulin treatment Lantus without needing a prescription. Semglee has exclusivity for 12 months, meaning the FDA can't approve another biosimilar interchangeable for Lantus during that time. That's a big deal as Lantus generated revenue of 2.7 billion euros ($3.2 billion) for Sanofi in 2020 and was one of its top-selling products.

It's another reason to expect that Viatris' numbers will look better in future quarters. On a forward price-to-earnings basis, the stock is trading at an incredibly cheap multiple of just 4. By comparison, Pfizer trades at more than 11 times its future earnings. Not only is Viatris a great value buy, but investors also could be getting some strong recurring income from the stock as well. This relatively new company paid its first dividend on June 16. Its quarterly payment of $0.11 means that on an annual basis, Viatris is yielding 3.1%, well above the S&P 500 average of around 1.3%. 

For both income and value investors, Viatris could prove to be a solid stock to pick up right now.

Suncor

Canadian energy giant Suncor can provide investors with a relatively safe way to invest in the oil and gas industry. The company has often looked for ways to become more efficient in its operations, helping create value for its shareholders.

For example, Suncor uses a robot to inspect storage tanks at its facilities and has deployed autonomous trucks to improve efficiency while also driving down costs. While changes like these result in job losses, they help the company remain profitable even when oil prices are low. 

For income investors, it's that focus on the bottom line that makes this a relatively safe dividend stock. In the past 12 months, Suncor's free cash flow of 2.4 billion Canadian dollars ($1.9 billion) has been nearly double the CA$1.3 billion it paid out in dividends during that period. With a forward P/E of less than 9, this is a cheaper stock to buy compared to ExxonMobil, which sports a P/E of 13. And when you add a 3.5% yield into the mix, Suncor looks like an even hotter buy.

Another reason to consider the stock is that the world's economies are still struggling from the pandemic, and so travel (and thus, demand for oil) will likely go higher as things get back to normal. Now, with the delta variant interrupting reopening plans, it might not be until next year or later that travel gets back to pre-pandemic levels. When that happens, rising oil prices could give Suncor's financials a big boost.

Although risks remain, buying shares of Suncor can pay off in multiple ways -- through both its dividend and capital appreciation.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Viatris Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Viatris Stock Quote
Viatris
VTRS
$10.78 (-1.64%) $0.18
Sanofi Stock Quote
Sanofi
SNY
$46.26 (-1.41%) $0.66
Suncor Energy Inc. Stock Quote
Suncor Energy Inc.
SU
$29.60 (-1.00%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.