After October’s favorable inflation data, November’s inflation rates came in at 7.1%, the lowest in one year. Moreover, core inflation rose 6% in November, down from 6.3% in October. Markets rejoiced over the better-than-expected inflation data. The S&P 500 gained 29 points, and the Dow Jones Industrial gained 104 points. Nonetheless, market volatility is expected to persist for an extended time. 

Under such circumstances, dividend stocks are ideal investment options because they offer investors consistent long-term returns despite economic uncertainty. Investors’ interest in dividend stocks is evident from the SPDR S&P Dividend ETF’s (SDY) 1.3% return over the past month and 5.6% over the past three months.

Given the backdrop, investors might consider adding cheap yet fundamentally sound dividend-paying stocks ARC Document Solutions, Inc. (ARC) and LSI Industries Inc. (LYTS) to their portfolios before 2023.

ARC Document Solutions, Inc. (ARC) 

Digital printing company ARC provides digital printing and document-related services in the United States. It provides managed print services, cloud-based document management software, and other digital hosting services. 

On November 2, 2022, Suri Suriyakumar, Chairman and CEO, said, “The strategy we put in place during 2019 created opportunities for ARC to grow in virtually any environment, primarily because we made diversity and resilience the keys to our success.”

ARC’s four-year average dividend yield is 1.94%, while its current dividend translates to a 6.92% yield.

ARC’s trailing-12-month EV/Sales of 0.62x is 63.23% lower than the industry average of 1.70x. Its trailing-12-month Price/Sales multiple of 0.43 is 67.7% lower than the industry average of 1.32.

ARC’s net sales came in at $73.14 million for the third quarter that ended September 30, 2022, up marginally year-over-year. Its net income increased 18.1% year-over-year to $3.74 million. In addition, its EPS increased 12.5% year-over-year to $0.09.

Over the past months, the stock has gained 6.6% to close the last trading session at $2.89.

ARC’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

ARC has an A grade for Value, Sentiment, and Quality. In the B-rated Outsourcing – Business Services industry, it is ranked first among 42 stocks. Click here for the additional POWR Ratings for Growth, Momentum, and Stability for ARC.

LSI Industries Inc. (LYTS)

LYTS produces and sells non-residential lighting and retail display solutions in the United States, Canada, Mexico, Australia, and Latin America. It operates in two segments: Lighting; and Display Solutions.

On November 2, 2022, James A. Clark, LYTS’ President and CEO, said, “During a period of broader market volatility, LSI delivered strong first quarter results, highlighted by substantial growth in net sales, margin rate, and profitability.”

LYTS has paid dividends for 17 consecutive years. While LYTS’ four-year average dividend yield is 3.46%, its current dividend translates to a 1.72% yield.

LYTS’ forward EV/Sales of 0.80x is 51.37% lower than the industry average of 1.64x. Its forward Price/Sales multiple of 0.64 is 50.38% lower than the industry average of 1.29. 

LYTS’ net sales came in at $127.07 million for the first quarter that ended September 30, 2022, up 19.4% year-over-year. Its net income came in at $6.26 million, up 100% year-over-year. Also, its EPS came in at $0.25, up 92.3% year-over-year.

LYTS’ revenue is expected to increase 7.5% year-over-year to $489.05 million in 2023. It surpassed EPS estimates in all four trailing quarters. Its EPS is expected to increase 28.1% year-over-year to $0.82 in 2023. Over the past year, the stock has gained 65% to close the last trading session at $11.63. 

LYTS’ overall A rating equates to a Strong Buy in our POWR Ratings system. It has an A grade for Sentiment and a B for Growth, Value, and Quality. The stock is ranked first among 89 stocks in the B-rated Industrial Equipment industry. 

We’ve also rated LYTS for Stability and Momentum. Get all LYTS ratings here.

ARC shares were trading at $2.83 per share on Wednesday afternoon, down $0.06 (-2.08%). Year-to-date, ARC has declined -13.43%, versus a -14.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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