My Top 2 Dividend Stocks to Buy Now

When it comes to valuation, most investors fall back on things like the price-to-earnings (P/E) ratio. Earnings are too variable for me, so I prefer metrics like price-to-sales ratio and, my personal favorite, relative dividend yield.

Right now the dividend yields on offer from Hormel Foods (NYSE: HRL) and Clorox (NYSE: CLX) are elevated and I think both stocks are worth buying. Here's why. Hormel has increased its dividend annually for over 50 years, making it a Dividend King. Over the past decade its dividend has grown at an annualized clip of 14%. And today, its dividend yield is toward the high end of its historical yield range. Clorox's cleaning business saw a massive spike in demand during the early days of the pandemic. The company ramped up supply to appease customers. And Wall Street bid the stock up in a shortsighted frenzy, given that the demand spike, like most such exogenous shocks, wasn't destined to last. The pain came to a head in the fiscal second quarter of 2022, when sales dropped 8% and gross margin contracted a massive 12.4 percentage points. The stock, understandably, plunged when its earnings came out. Today, the stock's yield, at 3.3%, is toward the high end of its historical range and the shares are 40% or so below the peak they reached during the early days of the pandemic.

Source: NASDAQ

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