Summary: By focusing on dividend-paying companies with strong fundamentals and attractive valuations, you can build a diverse portfolio that ensures both income and long-term capital appreciation. In this guide, we’re taking a look at 3 such undervalued dividend stocks to buy in 2024. To invest in stocks on our list, investors can open a trading account with an online stock trading platform such as eToro.
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What are dividend stocks?
Dividend stocks
One of the most important factors to consider when investing in dividend stocks is their dividend yield. Simply put, the dividend yield is a percentage calculated by dividing the annual dividend payment by the stock’s current market price. For example, if a stock is priced at $100 and pays an annual dividend of $4, the dividend yield is 4%. Naturally, higher dividend yields mean better returns on investment for shareholders.
Another important aspect is the dividend increase rate. Companies that raise their dividends over time tend to be more stable and attractive investment options, so a solid track record can be an excellent indicator of a company’s financial health.
However, it’s essential to strike a balance between current yield and dividend growth. As mentioned, current yield refers to the annual dividend payment divided by the stock’s price at the time of purchase. But, although a stock with a higher current yield might seem more attractive, it may not be the best choice in the long run if its dividend growth rate is low or erratic.
3 undervalued dividend stocks to buy in 2024
Undervalued dividend stocks are worth considering if you’re looking for an affordable entry into the market. For starters, you can check out some of the undervalued dividend stocks on our list below:
- Albermarle (NYSE: ALB);
- Texas Instruments (NASDAQ: TXN);
- Comerica (NYSE: CMA).
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1. Albemarle (ALB)
Industry: Chemical industry
Dividend yield as of December 2023: 1.27%
Market cap as of December 2023: $14.81 billion
Albemarle has a dividend yield of only 1.27% as of December 2023, but its rock-solid position in the lithium and EV battery market is more than promising, especially if we keep in mind that the global demand for ion-battery solutions is expected to increase from approximately 700 gigawatt-hours recorded in 2022 to around 4,700 gigawatt-hours by the end of the decade, according to Statista.
If you’re looking for a long-term investment option and steady but not necessarily high passive income, Albemarl is definitely worth keeping an eye out for.
Albemarle stock price today
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2. Texas Instruments (TXN)
Industry: Semiconductors
Dividend yield as of December 2023: 3.5%
Market cap as of December 2023: $140.96 billion
Texas Instruments is one of the world’s major microchip producers, boasting two decades of consistently increasing dividend yields, which now sit at around 3.5%. A higher yield can be attributed to the cyclical nature of the chip sector and the company’s substantial investments in new chip capacity, even during market downturns, which often allows it to come out with a competitive edge once the market has stabilized.
In light of the company’s past success –– its annualized dividend increased by 17% over the past decade — and unique strategic approach, its stock could present a lucrative opportunity for long-term income investors with higher risk tolerance.
Texas Instruments stock price today
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3. Comerica (CMA)
Industry: Financial services
Dividend yield as of December 2023: 5.89%
Market cap as of December 2023: $6.36 billion
Comerica is primarily focused on commercial banking and has a strong presence in the commercial real estate, pharmaceutical, and healthcare sectors. Remarkably, the bank offers a dividend yield of 5.89% as of December 2023, appealing to investors seeking income even in the face of declining stock prices. Indeed, with a 32.69% year-to-date decline, the stock appears undervalued compared to its less-fortunate counterparts.
Still, Comerica has allocated $736 million of its market capital in September 2023, according to its 2023 Q3 Press Release, establishing a substantial safety net in case of adverse market developments. If your risk tolerance is sufficiently high, Comerica is another worthy investment candidate heading into 2024.
Comerica stock price today
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Where to buy stocks?
Our recommended brokerage for all sorts of stocks is eToro, a major trading platform with tens of millions of active users and useful trading features such as:
- Commission-free stock and ETF trading;
- 2,000+ stocks from 17 exchanges;
- Fractional shares available;
- Charting tools;
- User-friendly platform.
Highly Rated Stock Trading & Investing Platform
-
Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
-
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
-
Copy top-performing traders in real time, automatically.
-
eToro USA is registered with FINRA for securities trading.
Note
1. 3 undervalued dividend stocks;
2. 3 best energy dividend stocks;
3. 3 oil dividend stocks;
4. 3 small cap dividend stocks;
5. 3 Warren Buffet dividend stocks;
6. 3 best UK dividend stocks;
6. 3 best dividend stocks.
Understanding and identifying undervalued dividend stocks
When looking for undervalued dividend stocks, it’s essential to analyze various metrics and estimates to determine if a stock is truly undervalued. The first thing to consider is the stock’s intrinsic value based on factors like financial strength, stability, and future growth prospects.
One method of determining intrinsic value is by analyzing the company’s price-to-earnings (P/E) ratio. This ratio compares the stock’s current price to its earnings per share, allowing you to compare stock valuation against similar companies or the market as a whole. For example, a low P/E ratio could indicate that the stock is undervalued compared to its peers.
When evaluating potential undervalued dividend stocks, consider using a combination of the following steps:
- Determine intrinsic value using methods such as the price-to-earnings ratio;
- Analyze the company’s financials to ensure it has a stable and growing dividend payment history;
- Compare stocks within the same sector or industry to find the best undervalued opportunities.
Why invest in undervalued dividend stocks?
During high inflation, fixed-income investments yield lower returns. That is, inflation lowers your purchasing power and diminishes the value of your money. Consequently, it’s crucial to look for other ways to protect your investments. One such strategy is investing in undervalued dividend stocks.
Why? For one, these stocks provide consistent income, which can be reinvested or used for living expenses. Furthermore, interest rates play a major role in the valuation of stocks. When rates are low, investors often turn to dividend-paying stocks as they offer better yields compared to fixed-income alternatives.
As interest rates rise, though, the attractiveness of dividend-paying stocks goes down. This is hardly surprising as fixed-income investments become more appealing.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about undervalued dividend stocks
What are undervalued dividend stocks?
Undervalued dividend stocks are shares of companies that pay regular dividends but whose market price is considered lower compared to their intrinsic value.
How do you identify undervalued dividend stocks?
To identify undervalued dividend stocks, use fundamental analysis to assess a company’s financial health, earnings growth potential, and dividend history. Moreover, you can follow financial analysts on social media and news portals to see what more experienced traders think.
Why do people invest in undervalued dividend stocks?
Undervalued dividend stocks can be a solid investment option because they give investors the option to buy shares at a lower price and enjoy potentially steady passive income.
Are there risks associated with investing in undervalued dividend stocks?
All investments are risky. Undervalued stocks are sometimes undervalued for a good reason, for example, poor financial health or industry challenges, so they are not always the right way to go.
Where can I buy dividend stocks?
To buy dividend stocks, you can open an account with an online stock brokerage such as eToro.
