Are these two dividend stocks the bargains of the year?

While the FTSE 100 index may be hovering around its all-time highs, there are plenty of popular stocks that are well off their highs and trading at low valuations. Here's a look at two dividend stocks that currently trade on P/E ratios of around 10.

Next

Next(LSE: NXT) shares have endured a torrid two-year period. Back in November 2015, sentiment towards the retailer was high and the shares changed hands for around 7,600p. Today, you can pick up the stock for just 4,300p.

At that price, Next's forward P/E ratio is a low 10.6, and its dividend yield has been pushed up to 3.7%. Does that make the stock the bargain of the year?

Personally, I'm not convinced that Next is a good stock to own right now. To me, the landscape for the retailer looks very challenging, and not dissimilar to the UK supermarket landscape. In the same way that Aldi and Lidl have eroded profitability at supermarkets such as Tesco and Sainsbury's, new online entrants to the fashion market, such as Asos and Boohoo.Com have made life very difficult for Next.

This is evident in the group's financial performance. Sales fell 2% last year and City analysts expect a further decline this year, followed by a rise of just 0.5% next year. In a recent trading statement, the retailer advised that it expects earnings per share to fall between 3.5% and 10% this year.

With that in mind, there are plenty of other dividend stocks I'd buy before Next.

Keller Group

One dividend stock that does look tempting right now is Keller Group(LSE: KLR). It is the world's largest independent ground engineering company, specialising in providing advanced foundation solutions for complex projects. It has operations in 40 countries across five continents, and generates a large proportion of its revenues from the US.

I last covered the stock back in August. At the time, Keller had a market cap of £600m. Today, the company is worth £660m, meaning the shares have risen 10%. However, I believe the stock still offers great value for long-term investors.

The ground engineering specialist released an upbeat trading update this morning, and stated that revenue and profit in the four months since its half-year results are ahead of the same period last year. The group remains on course to meet the board's expectations for the full year, with "good" year-on-year growth in both revenue and operating profit.

Keller described the US construction market as "solid," and said that while Hurricanes Harvey and Irma had resulted in lost production, and impacted profit by a one-off £3m, it expected "the heightened focus on hurricane and flood defences to lead to increased investment over time." Growth was strong across the EMEA region, and while pricing remained challenging in some parts of Asia, the group said that it expected this region to return to profitability in 2018.

City analysts forecast earnings of 88p per share for Keller this year, a rise of 16% on last year. At the current share price, that estimate places the stock on a forward P/E of just 10.5. An expected dividend payout of 30p this year means that a yield of 3.3% is also on offer. Those metrics look attractive to me. I believe Keller has considerable potential for long-term investors.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo.com. 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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