3 Cheap Dividend Stocks to Buy Now

You can find plenty of stocks with low price-earnings ratios and high dividend yields--usually a winning combination. Look closely at the underlying companies, however, and you may find balance sheets buckling under weighty debt loads or deteriorating profits, making the stocks much less of a bargain than they appear on the surface. More promising are dividend-paying stocks that have solid long-term prospects but appear to have hit some speed bumps. Buying these stocks involves taking a chance that their businesses will revive. In exchange for that risk, you can get stocks with low P/Es and above-average yields. If the companies' turnaround plans show even modest signs of success, the stocks could take off.

One stock in this camp is International Business Machines (symbol IBM, $148.14), a favorite of Warren Buffett, who owns shares through his holding company Berkshire Hathaway (BRK.B $131.47). Expectations for Big Blue are now low, to say the least. United Technologies (UTX, $93.31) also looks like a promising turnaround candidate. The company makes aircraft engines through its Pratt & Whitney division, along with Otis elevators, Carrier air conditioners and other products. Despite its strong lineup, the business has been in a funk. Clothing retailer Gap (GPS, $32.23) has plunged deep into the bargain bin, tumbling 26% this year. Sales have been sliding at its flagship Gap stores and Banana Republic chain. Analysts worry that Gap is also losing out to such "fast-fashion" retailers as H&M and Zara, which rapidly crank out high-end designs at rock-bottom prices.

Source: Jewish World Review

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