If you have £2,000 to invest and you’re looking for dividend stocks to give you a second income, there are plenty of options on the market right now. The FTSE 250, in particular, is full of bargains for income-seeking investors.
One of these is high-street retailer the Card Factory (LSE: CARD). Most investors wouldn’t touch a high street retailer with a barge pole in the current environment, but I believe the Card Factory deserves a second look.
Indeed, the company seems to be coping quite well at a time when so many other retailers are collapsing, or asking for creditor concessions to help keep the lights on.
Sector-leader
In its latest trading update, published at the end of September, Card Factory revealed sales grew 1.5% on a like-for-like basis during its fiscal first half.
Unfortunately, pre-tax profit declined 14.4% as higher costs hit profitability. Nevertheless, management is confident the company has what it takes to be able to grow at a time when so many other retailers are struggling.
The group is investing in its online business, focusing on personalisation and introducing newer varieties for seasonal festivities like Valentine’s Day. On top of these efforts, management is signing new retail partnerships in the UK and abroad as it grows its market share.
All of these indicate to me the company is well-positioned to navigate the current retail environment and could come out stronger on the other side.
With this being the case, I think the stock is an attractive investment at current levels as it trades at a discount forward P/E of just 9.7 and offers a dividend yield of 8.1%.
Distressed investing
As well as Card Factory, I think Micro Focus (LSE: MCRO) could also be worth your research time.
Following yet another poor trading update at the end of August, investors have been selling shares in this software giant over the past month. After these declines, the stock is currently changing hands at just 6.7 times forward earnings.
However, I think the market is missing something. Micro Focus has a history of issuing trading warnings but, for the most part, it has then gone on to outperform.
For example, following the company’s last major warning in March 2018, when the stock fell around 50% in a few days, it’s shares went on to double in value over the next 12 months.
And I think the same could happen this time around. Even though analysts have revised their growth forecasts for 2019 lower during the past few months, they’re still expecting the group to earn $2.03 (or around 170p) per share for the year.
If Micro Focus hits the City’s growth targets for 2019 without any further disappointments, that looks dirt cheap at current levels. On top of this, shares in the tech business currently support a dividend yield of 8.2%. The distribution is covered twice by earnings per share, so it looks exceptionally safe for the time being.
That’s why I think it could be worth snapping up shares in the business at the current price to take advantage of the market’s short term mentality.
