In this article, we will take a look at some of the most undervalued stocks that pay dividends.
Stock prices took a steep hit in March as investors grew concerned about a possible economic downturn, driven by unpredictable tariff policies and signs of slowing job growth. The broader market has dropped over 7% from its peak on February 19, putting stocks on the doorstep of a correction.
A group of seasoned investors saw last week’s stock market downturn as a buying opportunity. As the market briefly entered correction territory, wiping out approximately $5 trillion from the broader market’s value, corporate insiders began increasing their purchases. According to data from the Washington Service, the insider sentiment index climbed to 0.46 in March, up from 0.31 in January, with almost two weeks still remaining in the month. This puts the metric on track for its highest monthly level since June, bringing it closer to its historical norm.
Dave Mazza, chief executive officer of Roundhill Investments, made the following comment about the situation:
“If we see corporate insiders begin to use the opportunity in their stock prices to purchase shares, that shows that they have confidence in the underlying economy and in their underlying businesses. That differs from just the headlines, because the headlines are scary.”
In its 2025 US Market Outlook, Morningstar indicated that the US stock market was approaching the upper limit of its fair value range, suggesting that investors should moderate their return expectations for the year. It was noted that, since the end of 2010, the market had traded at such a premium or higher less than 10% of the time. Given these conditions, the firm had adopted a more cautious stance, emphasizing the increasing importance of portfolio positioning.
Morningstar advised investors to overweight value stocks and underweight growth stocks, citing that growth stocks were trading at their highest premium relative to fair value since the tech-driven bubble in early 2021, whereas value stocks remained undervalued. As of March 3, 2025, the Morningstar Value Index had gained 5.54% year to date, while the Morningstar Growth Index had declined 3.81%.
In addition, investors are shifting capital into value funds, which are perceived as more resilient during market downturns compared to growth stocks. Data from Lipper shows that U.S. growth exchange-traded funds (ETFs) saw $3.6 billion in outflows this month, while U.S. value ETFs attracted $1.8 billion in inflows. Value funds, which are largely composed of stocks from sectors like banking, energy, and utilities, provide a cushion against market volatility by focusing on stable, cash-rich, and undervalued companies that tend to be less sensitive to economic swings.
Chris Marangi, co-chief investment officer of value funds at Gabelli Funds, noted that value stocks present an appealing opportunity, especially among small and mid-cap companies. He highlighted that these firms tend to gain more from deregulation and tax cuts while being less impacted by challenges like tariffs. Given this, we will take a look at the most undervalued stocks according to hedge funds.
Photo by Annie Spratt on Unsplash
Our Methodology
For this list, we used a Finviz screener and identified dividend companies with forward P/E ratios below 15, as of March 20. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected seven companies that have the highest number of hedge fund investors at the end of Q4 2024. 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).
7. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 74
Forward P/E Ratio as of March 20: 9.40
Verizon Communications Inc. (NYSE:VZ) is an American multinational telecommunications company. Earlier this month, the company’s management cautioned that first-quarter performance might fall short of expectations. The company acknowledged that heightened competition and broader economic uncertainties in the US were impacting its results. While Verizon scaled back on promotions at the beginning of the year, rival telecom providers continued their aggressive offers, making its plans appear less competitive in comparison. That said, investors and analysts are hopeful for the company’s future. The stock has surged by nearly 9% since the start of 2025.
Verizon Communications Inc. (NYSE:VZ) delivered solid fourth-quarter results for 2024, reporting $35.7 billion in revenue, a 1.6% increase from the previous year. This growth was primarily driven by an increase in customer acquisitions across both mobile wireless and internet services. In the mobile wireless segment, net postpaid phone subscriber additions rose to 568,000, up from 449,000 in the prior year. Revenue from this segment climbed 3.1% year-over-year to $20 billion, marking its 18th consecutive quarter of growth.
Verizon Communications Inc. (NYSE:VZ) continues to appeal to investors due to its strong cash flow and focus on innovation. In fiscal 2024, the company generated $37 billion in operating cash flow, while free cash flow increased to $19.8 billion from $18.7 billion in the previous year. The company’s quarterly dividend comes in at $0.6775 per share for a dividend yield of 6.19%, as of March 20. In addition to its attractive dividend yield, the company also maintains an 18-year streak of dividend growth.
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 79
Forward P/E Ratio as of March 20: 13.6
QUALCOMM Incorporated (NASDAQ:QCOM) is an American semiconductor company that specializes in wireless telecommunications technology. In fiscal Q1 2025, the company reported $11.7 billion in revenue, reflecting a 17.6% increase from the previous year. This marked its third consecutive quarter of double-digit growth, setting a new record for quarterly sales. The company’s chip division (QCT) generated $10.1 billion in revenue, a 20% increase year-over-year. Smartphone-related sales rose 13% to $7.6 billion, while automotive revenue surged 61% to $961 million. Meanwhile, the Internet of Things (IoT) segment grew 36% to $1.5 billion.
With strong research and development capabilities, QUALCOMM Incorporated (NASDAQ:QCOM) is well-positioned to expand into high-growth areas like robotics chips. As automation reshapes industries such as manufacturing, logistics, and services, the need for advanced robotics technology is expected to rise, creating new market opportunities. Qualcomm’s cutting-edge semiconductor designs, including custom “Oryon” cores in the Snapdragon X Elite and Snapdragon 8 Elite, offer high performance and energy efficiency—essential for real-time decision-making in robotics applications. With a forward P/E ratio of 13.6, QCOM is one of the most undervalued stocks to consider.
Financially, QUALCOMM Incorporated (NASDAQ:QCOM) maintained a solid position in the latest quarter, holding more than $3.1 billion in cash and cash equivalents. Operating cash flow reached nearly $4.6 billion, and the company returned $942 million to shareholders through dividend payments. On March 18, the company declared a 4.7% hike in its quarterly dividend to $0.89 per share. This marked the company’s 21st consecutive year of dividend growth. The stock supports a dividend yield of 2.15%, as of March 20.
5. AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders: 80
Forward P/E Ratio as of March 20: 12.36
AT&T Inc. (NYSE:T) ranks fifth on our list of the most undervalued stocks according to hedge funds. The American multinational telecommunications company has steadily grown its wireless and fiber customer base in recent years. While economic challenges could impact demand, the company is focusing on bundling its wireless and fiber services to enhance customer retention. This strategic approach, along with a major transaction completed last year, has generated significant cash flow, allowing AT&T to make progress in lowering its sizable debt. The company’s net financial debt currently stands at over $122 billion, reflecting a nearly 10% reduction from the $136 billion reported less than two years ago.
AT&T Inc. (NYSE:T) remains committed to shareholder returns, supported by a solid cash position. In the latest quarter, operating cash flow totaled $11.9 billion, while free cash flow reached $4.8 billion. The company currently offers a quarterly dividend of $0.2775 per share, with a dividend yield of 4.14% as of March 20.
For the fourth quarter of 2024, AT&T Inc. (NYSE:T) delivered stable growth, with revenue rising 0.6% year-over-year to $32.3 billion. Operating income stood at $5.3 billion, while net income totaled $4.4 billion. The company reported 482,000 net additions in its postpaid phone segment and maintained an industry-leading postpaid phone churn rate of 0.85%. Mobility service revenues increased 3.3% year-over-year to $16.6 billion. In addition, AT&T Fiber gained 307,000 net customers, marking its 20th consecutive quarter with at least 200,000 net additions.
4. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 86
Forward P/E Ratio as of March 20: 11.46
ConocoPhillips (NYSE:COP) is a Texas-based global energy company that is engaged in hydrocarbon exploration and production. The company has recently focused on improving operational efficiency and expanding its LNG business. Its strong performance has been driven by disciplined cost management, successful integration of acquisitions, and progress in low-carbon technologies. In recognition of its sustainability efforts, the company received the Oil and Gas Methane Partnership 2.0 Gold Standard in 2024, underscoring its commitment to lowering emissions.
As a company engaged in hydrocarbon exploration and production, ConocoPhillips (NYSE:COP) experienced a notable increase in output during the fourth quarter of 2024. Production rose 14.8% year-over-year to 2,183 thousand barrels of oil equivalent per day (MBOED), largely due to strategic acquisitions, including the completion of its Marathon Oil acquisition in November 2024. The stock has a forward P/E multiple of 11x, which makes it one of the most undervalued stocks according to hedge funds.
ConocoPhillips (NYSE:COP) maintained a strong position, generating $20.1 billion in operating cash flow for the year, with total cash from operations reaching $20.3 billion. Shareholder returns remained a priority, with $3.6 billion distributed through dividends. Following a 34% increase in October, the company’s quarterly dividend now stands at $0.78 per share. Its dividend yield comes in at 3.05%, as of March 20. The company has been rewarding shareholders with growing dividends for the past 10 years.
3. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 101
Forward P/E Ratio as of March 20: 9.47
Citigroup Inc. (NYSE:C) is a global financial institution with operations spanning five key segments: Services, Markets, Banking, U.S. Personal Banking, and Wealth. The company provides a broad range of financial services, including cash management, investment banking, retail banking, and wealth management for high-net-worth individuals.
On March 13, Citigroup Inc. (NYSE:C) announced plans to reduce its dependence on IT contractors, cutting their share from 50% to 20%. At the same time, it aims to expand its full-time IT workforce from 48,000 to 50,000. This initiative is part of the company’s strategy to strengthen internal controls and address regulatory concerns related to data governance.
Citigroup Inc. (NYSE:C) faced significant challenges earlier due to major transaction errors, but analysts view these as temporary setbacks rather than long-term risks to the bank’s overall stability. In fiscal 2024, the company’s net income surged nearly 40% to $12.7 billion, surpassing its revenue target. This growth was driven by strong performances across its Services, Wealth, and US Personal Banking divisions, as well as greater operational efficiency from cost-cutting measures and a large-scale restructuring. Annual revenue increased 3% year-over-year to $81.1 billion.
Citigroup Inc. (NYSE:C) has maintained a strong track record of shareholder returns, distributing $6.7 billion in dividends and stock repurchases during FY24. With an uninterrupted 34-year history of dividend payments, Citigroup continues to stand out as one of the top dividend stocks. It currently offers a quarterly dividend of $0.56 per share for a dividend yield of 3.12%, as of March 20.
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 113
Forward P/E Ratio as of March 20: 11.40
An American financial services company, Bank of America Corporation (NYSE:BAC) ranks second on our list of the most undervalued stocks according to hedge funds. The company provides financial services to individuals, businesses, and government entities through four main divisions. Its Consumer Banking segment handles checking and savings accounts, credit cards, loans, and mortgages. Global Wealth & Investment Management offers investment, brokerage, and retirement planning solutions. The Global Banking division focuses on commercial lending, treasury services, and advisory support, while Global Markets specializes in trading and risk management.
Bank of America Corporation (NYSE:BAC) has consistently delivered strong financial results, maintaining profitability over time. Over the past five years, it has achieved an average net profit margin of 27.9%, demonstrating resilience across various economic conditions. In the fourth quarter of 2024, net income more than doubled to $6.7 billion, up from $3.1 billion in the prior year. Moreover, the bank continued to expand its customer base, adding 213,000 new consumer checking accounts, extending its six-year streak of quarterly growth.
Bank of America Corporation (NYSE:BAC) remains committed to rewarding shareholders, returning $2 billion through dividends in the most recent quarter. With 11 consecutive years of dividend growth and an uninterrupted dividend payment record spanning 27 years, it is a reliable dividend payer for income investors. The company’s quarterly dividend comes in at $0.26 per share for a dividend yield of 2.45%, as of March 20.
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 123
Forward P/E Ratio as of March 20: 13.00
JPMorgan Chase & Co. (NYSE:JPM) is an American banking and financial services company. It posted strong financial results in the fourth quarter of 2024, with net income soaring 50% to $14 billion and net revenue rising 10% to $43.7 billion. While net interest income declined 3% to $23.5 billion, noninterest revenue saw a significant 29% increase, reaching $20.3 billion. Operating expenses fell 7% to $22.8 billion, but after adjusting for the previous year’s $2.9 billion FDIC special assessment, they actually grew by 5%, driven by higher compensation, brokerage fees, and technology investments. The bank also allocated $2.6 billion for credit losses, with net charge-offs climbing to $2.4 billion, primarily from its Card Services division.
JPMorgan Chase & Co. (NYSE:JPM) has built up a substantial excess capital reserve, equivalent to around 10% of its market capitalization while maintaining a disciplined approach to capital deployment. Although stock buybacks have not been a top priority, the company still repurchased $6.36 billion worth of shares in Q3 2024. As economic conditions stabilize, it is expected to gradually reduce its cash reserves and increase capital returns to shareholders.
As a consistent dividend payer since 1972, JPMorgan Chase & Co. (NYSE:JPM) remains a preferred choice of income investors In the most recent quarter, the company reaffirmed its commitment to shareholder returns by distributing $3.5 billion in dividends. On March 18, it announced a 12% hike in its quarterly dividend to $1.40 per share. As of March 20, the stock has a dividend yield of 2.34%.
Overall, JPMorgan Chase & Co. (NYSE:JPM) ranks first on our list of the most undervalued stocks according to hedge funds. While we acknowledge the potential of JPM as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than JPM but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
