Are These 2 Dividend Stocks Bargains Yet?

With increased volatility could come an opportunity to pick up a steady dividend stock at a slightly lower price and perhaps a few more basis points of yield. In any case, this piece will concentrate on two dividend-paying blue chips that are starting to look cheap. Though it might be too soon to label them as bargains, I do think that getting a slight discount on such names could be worthwhile, especially if the January volatility is a sign of things to come for the rest of the year. 

Starbucks

Shares of Starbucks (NASDAQ:SBUX | SBUX Price Prediction) may very well be a bargain now that the worst of the multi-year sell-off seems to be in the rearview mirror. More recently, shares have started gaining again, with the long-time laggard now up close to 11% year to date. Undoubtedly, it’s tough to tell if the relative outperformance can continue, especially as the firm wanders into its coming quarters.

Personally, I think CEO Brian Niccol’s turnaround plan is working and that there’s a good chance that Starbucks can really start to impress from here. As Niccol looks to bring back the premium and “third place” kind of experience, I do think the Seattle-based coffee giant is en route to returning to what made the chain so great. Indeed, by returning to its roots and revamping stores with new furnishings and more of a fancy café feel (think to-stay mugs), I think Starbucks is poised to become successful again.

Add the simpler, streamlined menu into the equation, with more of a focus on functional menu innovations that ride on the back of real trends (think protein beverages), and I think Starbucks can get back to winning again. Sure, third-party cafés and all the sort remain rivals, but if Starbucks can deliver a faster, premium kind of experience, I do think it can regain share and get back on the earnings growth track. Perhaps Starbucks might have what it takes to beat protein smoothie shops, as its protein beverages hit the spot. 

With Starbucks also exploring the potential of a new, lower-cost store concept, I do think there’s the potential to really drive sales and margins higher over the long haul. Undoubtedly, if Starbucks can deliver high-quality drinks, at scale, while driving down costs (cheaper builds), I see Starbucks as a name undergoing a massive growth revival. With newfound momentum behind the stock and a nice 2.7% dividend yield, I find Starbucks a timely dividend play, especially as Niccol’s stewardship helps it return to its former glory.

International Business Machines

International Business Machines (NYSE:IBM) stock is an AI and quantum computing innovator that also sports one of the highest yields in large-cap tech, with a 2.2% yield at the time of this writing. Of course, that’s not a huge yield, but when it comes to high-tech darlings, such a payout is certainly a nice-to-have, especially if it doesn’t come at the cost of innovative growth prospects. Shares are around 3% from all-time highs after consolidating for most of the last quarter. 

With Jefferies recently upgrading shares to a Buy alongside a $60.00 price target hike to $360.00 over “AI monetization” benefits as well as “room for multiple expansion,” it’s hard not to want to buy a few shares as they go sideways for a while longer.

At 24.8 times forward price-to-earnings (P/E), shares of the $286 billion titan are starting to look compelling again. Undoubtedly, it took a long time for the legacy tech firm to reinvent itself. But now that it has, it’s shaping up to be a relative bargain for growth-minded investors seeking value and a growing payout.

While International Business Machines might not be as timely as the likes of a Starbucks, I still view it as an underrated fast-mover in AI. Add quantum into the equation and the name may very well be a bargain hiding in plain sight.