5 Best Undervalued Dividend Stocks to Buy Now

In this article, we discuss 5 best undervalued dividend stocks to buy now. If you want to read our detailed analysis of value and dividend stocks and their performance in the past, go directly to read 11 Best Undervalued Dividend Stocks to Buy Now. 

5. The Kroger Co. (NYSE:KR)

Number of Hedge Fund Holders: 42
P/E Ratio (TTM) as of April 17: 15.6 

The Kroger Co. (NYSE:KR) is an Ohio-based retail company that operates supermarkets and multi-department stores throughout the country. In March, Northcoast upgraded the stock to Buy with a $60 price target and appreciated the company’s recent quarterly earnings. The company is one of the best dividend stocks on our list.

On March 9, The Kroger Co. (NYSE:KR) declared a quarterly dividend of $0.26 per share, which was in line with its previous dividend. In 2022, the company stretched its dividend growth streak to 16 years. The stock’s dividend yield on April 17 came in at 2.18%.

As of the close of Q4 2022, 42 hedge funds tracked by Insider Monkey reported having stakes in The Kroger Co. (NYSE:KR), compared with 49 in the previous quarter. The collective value of these stakes is over $4 billion. With 50 million shares, Berkshire Hathaway was the company’s leading stakeholder in Q4.

Oakmark Funds mentioned The Kroger Co. (NYSE:KR) in its Q1 2023 investor letter. Here is what the firm has to say:

“The Kroger Co. (NYSE:KR is the second-largest grocery retailer in America, behind only Walmart. Although the grocery industry is highly competitive, Kroger’s scale advantages allow it to offer a more compelling value proposition than smaller peers and earn higher returns on capital. In recent years, the market has assigned Kroger a lower multiple due to concerns that e-commerce would disrupt traditional brick-and-mortar grocery businesses. However, we believe Kroger’s performance through the pandemic highlighted that its store footprint, distribution infrastructure, technology investments and strong brand all position the company well for a world with higher online grocery adoption. The stock trades for just 10x our estimate of next year’s EPS, which we believe is attractive given Kroger’s competitive positioning and earnings growth outlook. The pending merger with Albertsons has the potential to drive accelerated earnings growth and further scale advantages. If the merger is not approved, the company will have the capacity to return over 25% of its market cap to shareholders.”

4. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 56
P/E Ratio (TTM) as of April 17: 7.80

Verizon Communications Inc. (NYSE:VZ) is an American multinational telecommunications company, based in New York. In Q4 2022, the company generated over $35.3 billion in revenues, up 3.5% from the same period last year. Its cash position remained stable during the year as its operating cash flow for FY22 came in at $37.1 billion and its free cash flow stood at $14.1 billion.

On March 2, Verizon Communications Inc. (NYSE:VZ) declared a quarterly dividend of $0.6525 per share, having raised it by 2% in September 2022. The company has been growing its dividends consistently for the past 16 years, which makes it one of the best dividend stocks on our list. The stock’s dividend yield came in at 6.61% on April 17.

At the end of December 2022, 56 hedge funds in Insider Monkey’s database owned stakes in Verizon Communications Inc. (NYSE:VZ). These stakes have a total value of over $1.5 billion.

Mawer Investment Management mentioned Verizon Communications Inc. (NYSE:VZ) in its Q3 2022 investor letter. Here is what the firm has to say:

“There are a few other segments of our portfolios that displayed weakness in the quarter. Cable and telecommunication companies have been an area that has lagged the broader market as their worlds are increasingly colliding. Companies such as Verizon (NYSE:VZ) has been impacted as wireless operator is spending heavily to attract internet subscribers with fixed wired access and the cable companies are trying to build wireless businesses.”

3. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 57
P/E Ratio (TTM) as of April 17: 9.35

Chevron Corporation (NYSE:CVX) is a California-based energy and petroleum refineries company. In April, Scotiabank upgraded the stock to Buy and also lifted its price target on the stock to $200, highlighting the company’s overall performance.

Chevron Corporation (NYSE:CVX) currently offers a quarterly dividend of $1.51 per share for a dividend yield of 3.53%, as of April 17. The company is one of the best dividend stocks on our list as it has been raising its dividends for the past 36 years.

The number of hedge funds tracked by Insider Monkey owning stakes in Chevron Corporation (NYSE:CVX) stood at 57 in Q4 2022. These stakes have a collective value of over $32.2 billion.

Carillon Tower Advisers mentioned Chevron Corporation (NYSE:CVX) in its Q4 2022 investor letter. Here is what the firm has to say:

“Energy performed well during the fourth quarter, with the sector up about 23%. Investors returned to the sector after the Organization of the Petroleum Exporting Countries (OPEC) signaled it would reduce production. Chevron Corporation (NYSE:CVX) reported strong quarterly results while buying back stock, paying a healthy dividend, and maintaining a strong balance sheet.”

2. U.S. Bancorp (NYSE:USB)

Number of Hedge Fund Holders: 58
P/E Ratio (TTM) as of April 17: 9.64

U.S. Bancorp (NYSE:USB) is a bank holding company, headquartered in Minnesota, US. The company offers a wide range of financial services to its consumers. JPMorgan gave a neutral stance on the banking sector considering the inflationary environment. In view of this, the firm lowered its price target on the stock to $45 but maintained an Overweight rating on the shares.

U.S. Bancorp (NYSE:USB) is one of the best dividend stocks on our list as it has raised its dividend payouts for 12 years straight. The company pays a per-share dividend of $0.48 every quarter and has a dividend yield of 5.39%, as recorded on April 17.

At the end of Q4 2022, 58 elite funds tracked by Insider Monkey were long U.S. Bancorp (NYSE:USB), compared with 52 in the previous quarter. The stakes owned by these funds have a consolidated value of $2.6 billion. Jean-Marie Eveillard, Ken Griffin, and Warren Buffett were some of the company’s most prominent stakeholders in Q4.

Madison Investments mentioned U.S. Bancorp (NYSE:USB) in its Q1 2023 investor letter. Here is what the firm has to say:

“U.S. Bancorp (NYSE:USB) shares are ensnared in the bank-run panic that began late in the quarter. Two large banks failed in early March as depositors rushed to withdraw money on concerns that the banks would suffer from liquidity problems. That’s a self-fulfilling prophecy, of course, but in the case of the two banks, it was prompted by the revelations of utter mismanagement of their securities portfolio. Bank models are, essentially, to borrow short and lend long. This sounds dangerous of course, and it would be if not for the deposit guarantee provided by the FDIC. The history of the U.S. banking system can be divided into two eras – pre-FDIC, when bank runs were fairly common, and post-FDIC, when bank runs have been close to non-existent. However, FDIC protection has its limits, and it remains incumbent on management to properly manage its assets and liabilities. The two banks in question didn’t do that. By taking down the share prices of all banks, we think investors are shooting first and asking questions later; they are not distinguishing between the strong and the weak.

U.S. Bancorp, as one of the largest and best-managed banks in the country, appears to be a net beneficiary so far of the panic among some depositors, with a pick-up in net deposit inflows in recent weeks. We don’t dismiss the probability of industry contagion – in a true nationwide panic, the big banks will suffer along with the small banks, and the well-managed ones will suffer along with the badly-managed ones. But we think the odds of that are quite small, and recent steps by federal regulators confirm that they will do everything in their power to prevent such a scenario, given the calamitous impact that it would have on our economy. We tightly manage this risk by limiting our exposure to the banking sector.”

1. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 75
P/E Ratio (TTM) as of April 17: 7.5

An American multinational biotech and pharmaceutical company, Pfizer Inc. (NYSE:PFE) ranks first on our list of the best dividend stocks. The company offers a quarterly dividend of $0.41 per share and has paid regular dividends to shareholders consistently for the past 337 quarters. Moreover, it has raised its payouts for 13 years straight. The stock has a dividend yield of 3.98%, as of April 17.

At the end of December 2022, 75 hedge funds in Insider Monkey’s database reported having stakes in Pfizer Inc. (NYSE:PFE), down from 77 in the previous quarter. These stakes have a collective value of over $2.5 billion.

Diamond Hill Capital mentioned Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter. Here is what the firm has to say:

“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”

You can also take a look at 10 Best Education Stocks To Buy In 2023 and 11 Best 5% Dividend Stocks To Buy According To Analysts

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