In this article, we will take a look at some of the best cheap dividend stocks.
Value investing has remained a favored approach among investors for years, largely popularized by Warren Buffett, who continues to focus on stocks he believes are undervalued relative to their true worth. While growth investing has dominated market sentiment in recent times, the long-term performance of value stocks remains solid.
Former professor-turned-investment manager Josef Lakonishok and value investing specialist David Dreman strongly advocated for a patient, long-term approach to investing, believing that steady, disciplined strategies often outperform rapid, high-growth ones. Their research indicated that value investing tends to outperform growth strategies approximately 70% of the time, regardless of a company’s size. After analyzing companies across different market capitalizations, they found that, over long periods, value stocks consistently generated average annual returns slightly above 7%, surpassing the performance of growth stocks.
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Much of the Russell Index’s gains this year have been concentrated in a handful of mega-cap stocks, particularly the tech-heavy “Magnificent Seven.” These companies now make up over 25% of the index and were responsible for nearly 40% of its 21% total return in the first three quarters of 2024. However, market dynamics have started to shift in recent months, with value stocks gaining traction. In the third quarter, the Russell Value Index surged 9.4%, significantly outpacing the 3.2% rise in the Russell Growth Index, according to a report from BlackRock.
The report highlighted several key drivers behind this trend. Strong employment numbers, easing inflation, and the Federal Reserve’s move to start cutting interest rates have bolstered investor confidence, prompting a broader market rally beyond the dominant mega-cap stocks. Additionally, sectors that are more sensitive to interest rates—such as financials, utilities, and real estate investment trusts (REITs)—have benefited from a lower-rate environment.
Analysts advise investors against favoring a single investment strategy. JP Morgan noted that large technology companies are widely held both individually and within major indices. As a result, significant market fluctuations can occur when developments—such as the recent introduction of a Chinese large language model in late January—impact the sector. However, the firm does not recommend actively betting against the dominant tech giants that hold the largest weightings in the broader market.
Drawing comparisons to the dot-com bubble of 2000, JP Morgan highlighted that the leading companies of that era traded at forward price-to-earnings ratios between 50x and 75x. In contrast, most of today’s mega-cap stocks are valued at roughly half of those peak multiples. The firm further advised investors to diversify beyond growth equities, particularly by considering financial stocks. Alongside industrials, a balanced approach between growth and value stocks remains its preferred strategy.
Stocks that pay dividends are often associated with value investing, as they generally provide higher yields and demonstrate stronger financial stability compared to growth stocks. According to a report by S&P Dow Jones Indices, investment strategies centered on generating income tend to share traits commonly found in value stocks. Companies with attractive dividend yields and lower valuations often capture investor attention.
However, the report also pointed out that the Dividend Aristocrats Index does not adhere strictly to a value-focused approach. Instead, it maintains a mix of both growth and value stocks. A long-term review of the index, covering the period from 1999 to 2022, indicated that, on average, 59.04% of its holdings were classified as value stocks, while 40.94% fell into the growth category. Given this, we will take a look at some of the best cheap dividend stocks to consider.
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Our Methodology
For this list, we used a Finviz screener and identified dividend companies with forward P/E ratios below 15, as of March 6. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected 13 companies that have the highest number of hedge fund investors at the end of Q4 2023. The stocks are ranked in ascending order of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
13. The Kraft Heinz Company (NASDAQ:KHC)
Number of Hedge Fund Holders: 43
Forward P/E Ratio: 10.59
The Kraft Heinz Company (NASDAQ:KHC) is an American multinational food company. It is well known for its diverse lineup of iconic food and beverage brands, such as Kraft, Heinz, Philadelphia, Ore-Ida, Maxwell House, and Jell-O, among many others. Its strong reputation for quality has earned it a loyal global customer base, with its products serving as both household staples and key ingredients in the food service industry.
The Kraft Heinz Company (NASDAQ:KHC) has been struggling for quite some time now, with the share price declining by over 11% in the past 12 months. The company posted mixed results for the fourth quarter of 2024, as weaker sales were balanced by initiatives to improve profitability. Adjusted earnings per share came in at $0.84, surpassing market expectations by $0.06, primarily due to unexpected tax benefits and a reduced share count. However, quarterly revenue fell 5% year-over-year to $6.58 billion, falling short of the projected $6.66 billion as organic sales continued to decline. In its core US market, net sales dropped 3.9% from the prior year, with price increases only partially offsetting lower sales volumes.
Despite these headwinds, The Kraft Heinz Company (NASDAQ:KHC) maintained a strong financial position in fiscal 2024, generating $3.2 billion in free cash flow—an increase of 6% from the previous year. Operating cash flow also rose 5.2% year-over-year, reaching $4.2 billion. In addition, the company returned $2.7 billion to shareholders through dividends and share repurchases, which makes it one of the best dividend stocks on our list. The company currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 5.09%, as of March 6.
12. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Forward P/E Ratio: 10.54
Altria Group, Inc. (NYSE:MO) is an American tobacco company, headquartered in Virginia. The company manufactures a wide range of related products including cigarettes and other nicotine products. In the fourth quarter of 2024, the company reported $5.11 billion in revenue, reflecting a 1.63% increase from the previous year and exceeding analyst estimates by $59.6 million. Strong brand performance contributed to higher earnings and improved margins in its core tobacco segment, while the company continued making strategic investments to support future growth. Looking ahead to 2025, Altria projects adjusted diluted EPS between $5.22 and $5.37, representing an expected increase of 2% to 5% compared to its 2024 EPS of $5.12.
The tobacco industry has undergone significant changes in recent years. While smoking rates have declined globally, demand for smoke-free alternatives, such as e-cigarettes and oral tobacco, has risen due to perceptions of reduced harm. Altria Group, Inc. (NYSE:MO), known for brands like Marlboro and Parliament, has been adapting to these evolving consumer preferences by expanding its portfolio of smoke-free products. The stock has surged by nearly 37% in the past 12 months.
Altria Group, Inc. (NYSE:MO) company has a long history of prioritizing shareholder returns through consistent dividend payments. In fiscal 2024, it distributed $6.8 billion in dividends. With 55 consecutive years of dividend growth, MO is one of the best dividend stocks on our list. It currently pays a quarterly dividend of $1.02 per share and has a dividend yield of 7.19%, as of March 6.
11. General Mills, Inc. (NYSE:GIS)
Number of Hedge Fund Holders: 49
Forward P/E Ratio: 13.83
General Mills, Inc. (NYSE:GIS) ranks eleventh on our list of the best cheap dividend stocks to invest in. The company is a well-established player in the food industry, recognized for its wide range of brands, including Cheerios, Haagen-Dazs, and Betty Crocker. With operations spanning more than 100 countries, the company maintains a strong presence in the market through its extensive brand portfolio and continuous innovation. Recently, it has prioritized boosting sales volume and expanding its market share, both of which are crucial to its growth strategy.
General Mills, Inc. (NYSE:GIS) delivered solid results for the second quarter of fiscal 2025, generating $5.24 billion in revenue—a 2% increase from the previous year—exceeding analyst expectations by $97 million. Operating profit surged 33% to $1.1 billion, driven by stronger gross profit and the absence of a goodwill impairment charge that had weighed on the prior year’s results.
General Mills, Inc. (NYSE:GIS) offers a quarterly dividend of $0.60 per share for a dividend yield of 3.85%, as recorded on March 6. With a consistent cash flow, the company has a long-standing commitment to dividend payments. In the first half of fiscal 2025, operating cash flow rose 19% year-over-year to $1.8 billion. During this period, it returned $676 million to shareholders through dividends. Notably, the company has maintained an unbroken record of dividend payments for 125 years, solidifying its position as a reliable dividend payer.