Why Big Lots and its 5.8% Dividend Might Be Too Cheap to Pass Up

Big Lots, Inc. (NYSE:BIG) has lost more than half of its value in just the past year. The discount retailer has been in a free fall since last December when shares tumbled after the company disappointed in its quarterly earnings report and cut its guidance.

The company has recovered from the dreadful quarter that saw it land in the red with three straight quarters of profits since then.

However, the stock has still failed to gain traction as it’s at lows not seen in about a decade. But there are a couple reasons that could make the stock a very attractive buy today.

For one, if a recession does end up hitting as many investors are fearing in the U.S., that could drive a lot of consumers to Big Lots in search of savings, giving its sales a possible boost in the process.

And with the stock trading at around 1.3 times its book value and less than seven times earnings, there’s a lot of potential upside.

Secondly, the stock’s dividend yield has now risen to 5.8% per year. That’s a terrific payout that can allow investors to generate some cash while they wait for the stock to recover.

One of the advantages of buying a stock at a low is that since the yield is inversely related to share price, investors are able to lock-in a better return than would be available if the stock had been doing well.

And if it recovers, investors will still be earning the same yield since they will be collecting the same dividend income at lower dollar amount invested.

Big Lots has some risk, but the reward could be significant for investors that take a chance on the stock today.