Why I'd buy these 2 bargain high-yielding dividend stocks

Bookmaker William Hill(LSE: WMH) has been trotting along nicely with its share price up almost 15% in the last three months, so investors were backing a winner even before today's upbeat trading statement. The report is headlined "Continued momentum in 2017 for William Hill", with net revenues up 4% in the third quarter, boosted by the McGregor-Mayweather fight.

Strong bet

The share price is largely unchanged this morning, which suggests William Hill told investors little new but gave them little to worry about either. Online net revenue rose 6% with wagering up 13%, and gaming net revenue climbing 14%. Retail net revenue rose 3% with growth in both Sportsbook and gaming, with the US continuing to deliver strong net revenue growth, up 30% in local currency.

There were some disappointments, including a 1% drop in the amounts wagered at its UK retail shops in the 17 weeks to 24 October and a 5% wagering decline in Australia, although the latter was softened by improving gross win margins. William Hill remains on track to deliver the previously announced £40m of annualised cost efficiencies by the end of 2017, to be reinvested in the business.

Double fix

CEO Philip Bowcock hailed "good financial and operational progress" with its online business performing particularly well, as UK wagering climbed 14% year-on-year, in spite of the absence of a major football tournament, and an acceleration in gaming growth.

A fair amount rests on what the UK government will decide to do about 'crack cocaine' fixed odds betting terminals, with a report due in January. It is also hanging on a 4 December US Supreme Court hearing on the Professional and Amateur Sports Protection Act, with a decision expected next year that could liberalise US sports betting.

If you want to buy today, the price looks right as the share trades at a bargain forecast valuation of 11.8 times earnings, with earnings per share (EPS) growth forecast to rise 5% and 8% in 2017 and 2018 respectively. The forecast yield is currently 4.7%, covered 1.8 times. It looks like a winner to me although here is another racy stock in that could make you stunningly rich.

Strange brew

Brewer Greene King(LSE: GNK) offers an even more generous income stream with a current yield of 6.4%. Naturally, a headline figure like that will ring alarm bells, and you will not be surprised to see that the company has had a difficult time of it lately.

Its share price has fallen by around almost 30% over the past six months after a wet end to the summer kept people at home and hit sales, while wage growth stagnation and the post-Brexit drop in consumer confidence have also inflicted some damage. The living wage has driven up costs and competition is rising in the pub and restaurant sector. As I wrote in September, it is not easy being Greene King right now.

Extra strength income

However, if you are looking for a recovery stock, you will note that many of these problems are reflected in today's lowly valuation, with the stock trading on a forward P/E ratio of just 7.7 times earnings. This negative sentiment is unsurprising, with EPS forecast to drop 6% in 2018, and stay flat in 2019. However, you do get that juicy yield while you wait for the recovery, with healthy cover of two times.

Income stocks like these form the bedrock to a comfortable retirement and you can find plenty more dividend winners if you know where to look.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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