We recently published a list of the 10 Best Value Dividend Stocks to Invest in According to the Media. In this article, we are going to take a look at where Diamondback Energy, Inc. (NASDAQ:FANG) stands against other best value dividend stocks.
In just a few weeks, investor sentiment has shifted dramatically—from optimism after the elections to concerns about an economic slowdown, and even fears of a possible recession. As of April 21, the broader market had dropped more than 12%, and it’s now down over 16% from its February peak. Though the market is flirting with the bear market territory, analysts note that such declines tend to occur every few years, and while recoveries vary in pace, markets have historically bounced back over time. For context, the last major pullback was in 2022 (−28%), preceded by 2020 (−35%) and 2018 (−20%).
A report by Fidelity Investments pointed out that the current market correction has been both swift and sharp. Encouragingly, when compared to past declines, the downturn seems to have already reached the lower end of the typical range in terms of both depth and speed, hinting that markets might stabilize in the near future.
As stock prices decline, many investors are taking advantage of the dip, aiming to benefit from the ongoing market sell-off. Analysts, for their part, have generally favored value stocks, citing their historically strong performance. A report by Dimensional Fund Advisors supports this view, noting that value stocks—typically those trading at lower relative prices—have consistently delivered higher expected returns than growth stocks in the US market.
The report further mentioned that although there have been periods when value stocks underperformed, the core principle remains unchanged: lower relative prices tend to be linked with better long-term returns. The value premium has often surfaced suddenly and in significant amounts. For instance, in years when value outpaced growth, the average outperformance was close to 15%. Between 1927 and 2023, US value stocks have, on average, delivered an annual return that was 4.4 percentage points higher than that of growth stocks.
Dividend paying companies, in addition to value stocks, are also reliable options in the current market environment. Many reports have highlighted that investors often gravitate toward companies with high dividend yields and low valuation multiples. A report from S&P Dow Jones Indices highlights that the Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, offers a balanced mix of both value and growth traits. Since 1999, the index has typically included about 60.5% value-oriented stocks and 39.5% growth-oriented stocks, indicating a neutral stance between the two investment styles.
Analysts emphasized that a portfolio focused on solid dividend yields, steady dividend increases, and dependable payouts remains a timeless strategy. They added that even without depending on shifts in market valuation, the combination of income and its consistent growth could drive nominal gross returns of over 10% per year.
A pipeline worker overseeing the flow of crude oil into storage tanks from an integrated water system.
Our Methodology
To compile this list, we thoroughly reviewed reputable sources such as Forbes, Morningstar, Barron’s, and Business Insider. From their latest articles, we gathered the value stocks they collectively favored. From that selection, we picked 10 stocks with forward P/E ratios below 20, as of April 21. These stocks are ranked in descending order of their P/E ratios.
At Insider Monkey, we are obsessed with hedge funds. 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).
Diamondback Energy, Inc. (NASDAQ:FANG)
Forward P/E Ratios: 9.76
Diamondback Energy, Inc. (NASDAQ:FANG) is an independent energy company that is mainly engaged in the exploration of hydrocarbons. In the fourth quarter of 2024, the company reported revenue of $3.71 billion, up 66.5% from the same period last year. The revenue also beat analysts’ estimates by $161.7 million. It posted an average daily production of 475.9 thousand barrels of oil (or 883.4 thousand barrels of oil equivalent). During this period, the company drilled a total of 137 gross wells—131 in the Midland Basin and six in the Delaware Basin. It brought 128 operated wells online, including 124 in the Midland Basin and four in the Delaware, with the average lateral length of those wells reaching 11,810 feet.
Diamondback Energy, Inc. (NASDAQ:FANG)’s cash position also remained strong. In the most recent quarter, the company’s operating cash flow came in at $2.3 billion, and its free cash flow was $1.3 billion. It also returned $694 million to shareholders through dividends and share repurchases, which represented 51% of Adjusted Free Cash Flow. In February, the company declared an 11% hike in its quarterly dividend to $1.00 per share. It is one of the best value dividend stocks as the company has raised its payouts multiple times since the initiation of its dividend policy in 2018. The stock supports a dividend yield of 4.69%, as of April 21.
At the end of Q4 2024, 53 hedge funds tracked by Insider Monkey held stakes in Diamondback Energy, Inc. (NASDAQ:FANG), up from 49 in the previous quarter. The consolidated value of these stakes is over $1.7 billion. With over 2.8 million shares, Diamond Hill Capital was the company’s leading stakeholder in Q4.
Overall, FANG ranks 3rd on our list of the best value stocks that pay dividends. While we acknowledge the potential of FANG 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 FANG 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.
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Disclosure: None. This article is originally published at Insider Monkey.