Why I'd buy mega-cheap dividend stock Plus500 Ltd today

Investor appetite for Plus 500(LSE: PLUS) has taken off in Monday trading following the release of blockbuster trading details.

The contracts for difference (or CFD) provider was recently up 13% from last week's close and dealing at levels not seen since late September.

Plus 500 advised that revenues exploded 19% during January-June, to $188.4m, a result that saw net profit more than double to $90.7m.

These record half-time results were "significantly ahead of expectations," the Israel-based business advised, and it was helped by an 8% rise in the number of customers to an all-time high of 112,317. The company attributed this to its retention initiatives as well as successful marketing campaigns.

The spreadbetting star saw the number of new customers gallop 43% higher year-on-year in the first half, to 31,671.

And in further good news, the business added that trading in the third quarter "has continued to be strong," and that it is "currently on track to significantly exceed prior market expectations for 2017."

Trading titan

The City had been expecting earnings at Plus 500 to hurtle 16% lower in 2017, although I believe today's spectacular numbers should prompt a weighty upgrade to such forecasts.

And such a scenario should make the business a much hotter value pick than it is already. Plus 500 deals on a forward P/E ratio of 11.2 times even after today's share price charge, well under the widely-regarded value benchmark of 15 times.

There is plenty for dividend chasers to get excited about too. The number crunchers expect a total ordinary dividend of around 61.2 US cents per share, roughly matching last year's levels and creating a stonking 6.4% yield.

While it still faces some regulatory uncertainty, I reckon Plus 500 is a steal at these prices considering its stunning momentum, and expect the huge investment it has made in improving its trade platforms -- as well as boosting its marketing activity -- to keep driving business.

Drive away

I am not so optimistic over the earnings, and thus dividend, outlook over at Pendragon (LSE: PDG) as pressure on car shoppers' wallets mounts.

Data from the Society of Motor Manufacturers and Traders last week showed car sales in Britain topple for the fourth successive month in July. New registrations dropped 9.3% year-on-year last month, to 161,997. This meant that sales in the first seven months of 2017 had fallen 2.2% to some 1.56m units.

Against this backcloth the City expects earnings at Pendragon to decline fractionally in 2017, breaking its long-running record of bottom-line advances. Still, this results in a forward P/E ratio of just 8.4 times.

Dividend chasers could also be forgiven for smacking their lips too, a predicted 1.5p per share reward yielding a handsome 4.6%.

I for one won't be tempted to invest any time soon, however, with sales indicators for big-ticket items like cars continuing to worsen. Indeed, Visa's latest Consumer Spending Index released on Monday showed spending fall 0.8% in July. This meant sales have fallen for the third consecutive month for the first time since February 2013.

With the UK's economy sliding, and political instability likely to persist for some time yet, I reckon now could prove a dangerous time to pile into the likes of Pendragon.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Pendragon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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