For beginning investors, or those who may not have a lot of money to invest, share price can become important. Many brokerages do offer fractional shares, where it's possible to buy less than one share of a company, but for those that don't, the investing options could be limited by price.
Choosing stocks by share price alone isn't the best strategy since many struggling companies trade for a low price. However, there are plenty of great businesses to own that happen to have a fairly low share price. Here are two of the best stocks to buy right now -- and all you need is $75.
1. Realty Income
Known as "The Monthly Dividend Company," Realty Income (O -0.17%) specializes in leasing commercial real estate to a variety of different industries. The three largest are grocery stores, convenience stores, and dollar stores. Because Realty is structured as a real estate investment trust (REIT), it is obligated to pay 90% of its taxable income to its shareholders as dividends. The recently completed three-month period marked the 640th consecutive quarter that Realty has raised its dividend, which currently yields 5.2%.
Realty Income is careful about the industries in which it operates, choosing parts of the economy that are less likely to struggle at the same time in varying economic climates. So far, this strategy has paid off. Realty has enjoyed a 13% compound annual return since its 1994 debut on the public markets.
The REIT recently reported strong Q3 2023 results. Revenue increased by 24%, funds from operations (FFO) per share grew by 7%, and adjusted FFO (AFFO) per share grew by 4%. This is within the range that management expects moving forward. Between its anticipated 4% to 5% dividend yield and 4% to 5% growth in AFFO per share, the expectation is for Realty Income to produce 8 to 10% in operational return.
Realty's stock price is down 15% year to date and trades for around the same price as mid-2020. Considering that Realty has grown its revenue by 143% since then, today's price looks attractive.
2. Shopify
Shopify (SHOP 1.11%) helps businesses of all sizes by providing website platforms as well as back-office support. Over time, Shopify has added more and more components to its offering to help merchants handle almost every aspect of running a business.
So far, Shopify has been successful. It has a 10% e-commerce market share and customers in 175 countries. Since its inception as a company, more than $800 billion has been transacted on its platform.
Revenue growth for Shopify has remained consistent throughout its time as a public company. Recently, it has been in the mid-20% range for most quarters. The bottom line has been more of a struggle. The recently reported third quarter of 2023 was only the second quarter of positive net income in the past two years.
However, there is some good news as it pertains to profitability. Operating income in Q3 2023 showed impressive improvement at $122 million, compared to an operating loss of $346 million in Q3 2022. This was driven by a 410-basis point improvement in gross margin and lower operating expenses. In fact, operating expenses were only 45% of revenue in Q3 2023, compared to 74% in Q3 2022.
Management expects to see year-over-year improvements in gross margin and a sequential decrease in operating expenses, suggesting that Q3's results could be part of a trend and not simply an outlier. This would be great news for investors looking for sustained profitability.
The upside of Shopify's recent inconsistent profitability is that the share price has taken a beating, providing a nice discount for potential investors. Shares today trade 56% lower than their late-2021 high and Shopify's price-to-sales multiple of 14 is about halfway between its historical average of 23 and its all-time low of 6.
