Dividend stocks become very enticing when the market is volatile. The steady income they provide is a ballast when stock prices are shaky, but they remain attractive in any environment, especially for people who are retired or close to that milestone and are looking for passive income.
What's even better than that is passive income at dirt cheap prices. With an uncertain market and many stocks that are being driven lower, investors can buy high-yield dividend stocks at rock-bottom prices. Consider Prudential Financial (PRU 1.26%), Target (TGT 1.28%), and Citigroup (C 0.26%).
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1. Prudential
Prudential is a financial powerhouse that offers life insurance policies as well as other financial products that help customers create financial plans for retirement. It's a global firm with more than 50 million customers and over $1.7 trillion in assets and growing.
Although it faced challenges during the early stages of the pandemic, it has rebounded and is demonstrating impressive growth. In the 2021 fourth quarter, net income increased 48% year over year to $1.2 billion, or earnings per share (EPS) of $3.13 vs. $2.03 last year. Management is committed to generating revenue growth, becoming less market-sensitive, and becoming more agile.
Prudential is not a high-growth company. It's an established giant that's close to 150 years old and well past any high-growth phase. While that means revenue isn't likely to skyrocket at any given time and stock gains will likewise be temperate, the company and its cash generation are super-reliable. It's been paying a dividend for 20 years, and its yield at the current price is 4.17%, well above the typical yield for an insurance company.
Meanwhile, the shares are trading at 5.9 times trailing 12-month (TTM) earnings, which is dirt cheap even as far as slow-growing insurance companies go. And that's after the stock gained 26% over the past year. Prudential stock can provide stability and income in changing times and any time.
2. Target
Target is also fairly old, having been around for over 80 years in the form that we know it. However, it was only very recently, in 2017, that it invested in digital trends which were increasing in popularity. That made it perfectly poised to handle the pandemic that arrived in the U.S. two years ago. Target's been a model of the ideal omnichannel shopping experience since then, with its mix of same-day services, renovated stores, and an in-store delivery network that's quick and cheap.
That's why it's been posting exceptional growth since the pandemic started, although that has decelerated as the world gets back to a new normal. In the company's 2021 fiscal fourth quarter, comparable (same-store) sales increased 9% year over year on top of 21% last year. EPS increased to a record $3.21 from $2.73 last year. And the company's unique delivery model shipped 95% of orders from stores instead of distribution centers.
Target became a Dividend King with its latest dividend raise, which was a 32% hike to $0.90 per share. The dividend yields 1.59% at the current price, above the S&P 500 average. The shares are very reasonably valued, trading at 16 times trailing 12-month earnings. Target stock has also outperformed the S&P 500 by a wide margin over time, and it looks highly undervalued right now.
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3. Citigroup
Citigroup is one of the biggest banks in the U.S. Like Prudential, it's an established, cash-rich company that offers value and income in place of growth. It's activities include personal lending, a huge institutional lending business, and wealth management services. In last year's fourth quarter, it produced $17 billion in revenue and $3.2 billion in net income. These numbers actually weren't as impressive as a year ago, and the bank hasn't been performing as well as other large banks.
Citigroup has been hit hard by volatility in the markets and macroeconomic trends that work against the banking industry. But it's been doing worse than the general industry due to internal business practices. Relatively new CEO Jane Fraser has been working on curtailing less profitable segments and creating a more efficient company. However, investors weren't impressed with a recent company presentation, and that led the stock price to fall.
But that could now be a great opportunity for investors looking for a reliable, high-yielding dividend at an attractive price. The bank pays a dividend that yields 3.6% currently, which is a good deal higher than similar bank stocks, and the shares trade at only 5.7 times trailing 12-month earnings, well below other large banks. This undervalued stock generates loads of cash and still has a bright, long-term trajectory. It can provide passive income for dividend investors in a volatile market.
