2 Beaten-Down Dividend Stocks to Buy Hand Over Fist

Dividend stocks are a great source of passive income. For those who choose to reinvest their dividends, this decision can significantly increase long-term returns. And while high-earning stocks often attract a lot of attention from enthusiastic investors who bid up their stock prices, it's possible to find some that have been punished by the market – perhaps in due to company-specific issues – and still worth buying.

Let's consider two notable examples today: Gilead Sciences (NASDAQ:DOR) And eBay (NASDAQ:EBAY). Here's a look at these two strong but struggling dividend-paying companies.

1. Gilead Sciences

Gilead Sciences' financial results have been impressive in recent years, as the biotech has faced fluctuating revenue from its COVID-19 treatment, Veklury. In a sense, Veklury has been a lifeline for Gilead Sciences. It was one of the first therapies approved to treat COVID-19, and even with new variants of the virus, it remains in use. That helped the drugmaker's revenue stay afloat as sales of other products fell due to the outbreak.

Yet as the pandemic slowly faded, it became a dead weight on Gilead's top-line growth. At the same time, the company encountered some clinical and regulatory issues which caused its share price to fall. Still, there's a lot to like about Gilead Sciences' business, especially for investors looking for a stable and reliable dividend payer.

Its HIV franchise remains the market leader. In the third quarter, the company's anti-HIV drug Biktarvy had a 47% market share in the United States, up 2% year-over-year. This means that almost half of HIV patients taking medication are taking Biktarvy. Gilead Sciences' oncology portfolio is also growing in importance. Additionally, the drugmaker's pipeline includes 61 programs, with 19 – or nearly a third of that total – in Phase 3 studies.

And the dividend? Gilead Sciences has not stopped its payments over the past five years despite the pandemic and all the economic problems it has brought. In fact, the company has increased its distributions by approximately 19% since 2019. The stock currently offers a yield of 3.9%, as well as a cash payout ratio of approximately 48%.

Gilead shares are down 8% over the past 12 months. The biotech's forward price-to-earnings (P/E) ratio is 10.7, compared to an average forward P/E of 22.3 for S&P500. At these levels, Gilead Sciences stock looks like a buy for income seekers willing to stay the course.

2. eBay

E-commerce pioneer eBay has hardly been a growth machine in recent years, which is part of the reason it has underperformed the market. In the third quarter, the company's revenue increased 5% year-over-year to $2.5 billion. However, there is still a lot to like about this company.

First, eBay is one of the most recognizable names in the e-commerce industry – and the brand name matters a lot. The company also arguably benefits from the network effect, with merchants and consumers increasingly seeking each other out on the platform.

Second, eBay has implemented a plan to revive growth in recent years. The company is doubling down on its “target categories,” meaning high-value luxury and collectible items, such as watches, handbags, vintage sneakers, and more. Management reported that this segment grew 7 points faster in the third quarter than the rest of the company's market.

This could help eBay's revenue growth accelerate by focusing on these items. The company is also improving its advertising activities. Through its advertising products (which give sellers the opportunity to promote and improve visibility of their items), eBay's advertising revenue in the third quarter was $366 million, 24% higher than last year. 'last year.

Third, eBay generates consistent profits and cash flow. The company's adjusted net income fell slightly – 1% year over year to $545 million – in the third quarter. But it finished the third quarter with free cash flow of $777 million, an increase of 22.7% from the same period last year.

Then there's eBay's dividend. The stock's yield is currently 2.4% and the company has increased its distributions by 78.6% over the past five years, currently boasting a cash payout ratio of just 20.7%.

Finally, eBay's forward P/E is 9.5. Of course, it's not the most dazzling title in the e-commerce niche. There's not much flashy about the company's operations. However, it is a stable and reliable dividend payment system that should appeal to low-risk, income-seeking investors.

Should you invest $1,000 in Gilead Sciences right now?

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool Ranks and Recommends Gilead Sciences. The Motley Fool recommends eBay and recommends the following options: Short $45 January 2024 calls on eBay. The Mad Motley has a disclosure policy.

2 Beaten Dividend Stocks to Buy in Hand was originally published by The Motley Fool

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