An old proverb states, “March comes in like a lion, out like a lamb.” It refers to the weather. But it can be applied to the stock market in March 2023. One of the best ways to profit from recent, indiscriminate selling is by targeting the high-yield dividend growth stock Best Buy Co. (BBY), says Prakash Kolli, editor of Dividend Power.
The failure of two regional banks related to tech and cryptocurrency startups has caused turmoil. Because of contagion fears, investors have sold bank stocks and bank ETFs, especially regional banks. At the same time, they have sold the broader market.
But the selling is probably overdone, and many companies do not have the same exposure to riskier assets. So, this indiscriminate selling presents an opportunity for brave investors in dividend payers like BBY.
Best Buy sells consumer electronics, personal computers, software, mobile devices, and appliances, and provides services, through its 1,100+ stores. In addition, the firm acquired YardBird, expanding into outdoor furniture. The company’s annual sales exceeded $46.3B in fiscal 2023.
Best Buy has increased its dividend for 20 years. The declining stock price has increased the dividend yield to nearly 5%. Moreover, dividend safety is excellent, with a payout ratio of ~50% and a net cash position on the balance sheet.
The company trades at a price-to-earnings ratio (P/E ratio) of around 8.0X, below the 5-year range. In addition, investors expect little from the company because of the downturn in electronics spending after the pandemic. But we view Best Buy as an acceptable choice for investors seeking a retailer to add to their passive income portfolio.
Recommended Action: Buy BBY.