We recently published a list of 12 Incredibly Cheap Dividend Stocks to Buy Now. In this article, we are going to take a look at where General Motors Company (NYSE:GM) stands against other incredibly cheap dividend stocks to buy now.
Value investing has long been a preferred strategy among investors, largely influenced by Warren Buffett, who continues to seek out stocks he believes are trading below their intrinsic value. While growth stocks have recently captured more market attention, value stocks have demonstrated strong long-term performance.
Investment experts such as Josef Lakonishok and David Dreman have emphasized the importance of patience and a disciplined approach, arguing that steady, well-researched investments often yield better results than chasing rapid growth. Their research suggests that value investing outperforms growth strategies about 70% of the time, regardless of a company’s size. Examining businesses across different market capitalizations, they found that, over extended periods, value stocks consistently delivered average annual returns exceeding 7%, outperforming their growth counterparts.
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Lowell Miller’s book, Single Best Investment, explored the principles of value investing, drawing on the research of Fama and French published in the Journal of Finance. The book explained that when a growth stock fails to meet investors’ high expectations, its price often experiences a steep drop as the market reassesses its true worth. On the other hand, value stocks, which typically start with lower expectations, have the potential to surpass forecasts, leading to upward price adjustments. However, the book also underscored the importance of diversification, cautioning against concentrating too much capital on a single investment. Historically, a well-diversified portfolio has proven to be a safer strategy for investors.
A report by BlackRock highlighted that value stocks can provide stability in volatile market conditions. This was evident during the 2022 market downturn when growth stocks suffered heavy losses, while value stocks experienced comparatively smaller declines. By nature, value stocks tend to trade at lower price levels than growth stocks, though the size of this discount has fluctuated over time.
Market analysis suggests that value stock valuations would need to rise by over 40% to return to their historical median, signaling potential upside if they regain investor favor. With growth stocks trading at high valuations, investors may increasingly shift their focus toward value stocks, particularly as the market broadens beyond mega-cap companies. While past performance does not guarantee future outcomes, history provides some perspective. BlackRock noted that the last time the valuation gap between the Russell Growth and Russell Value indexes was as wide as it is today—back in December 2000—value stocks went on to outperform growth stocks over the subsequent one-, three-, and five-year periods.
Dividend-paying value stocks can appeal to investors looking for a combination of steady income and growth potential. These stocks are often associated with well-established companies that, despite being undervalued by the market, continue to demonstrate solid financial strength. In this article, we will take a look at some of the best dividend stocks that are incredibly cheap.
Our Methodology
For this list, we used a Finviz screener and identified dividend companies with forward P/E ratios below 11, as of March 14. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected 12 companies with strong dividend histories and solid balance sheets. The stocks are ranked according to their forward 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).
A group of technicians in a garage, inspecting car parts and ensuring safety compliance.
General Motors Company (NYSE:GM)
Forward P/E Ratio as of March 14: 4.10
General Motors Company (NYSE:GM) is an American multinational automotive company that sells trucks, cars, auto parts, and offers software-based services and subscriptions. In the fourth quarter of 2024, the company generated $47.7 billion in revenue, an 11% increase from the prior year. However, net income declined by more than $5 billion due to one-time charges, including $4 billion in non-cash restructuring costs and write-downs tied to certain joint ventures in China. Additionally, the company incurred $0.5 billion in expenses after opting to discontinue funding for its Cruise robotaxi business.
Rather than investing further in robotaxi development—a costly and time-intensive venture—General Motors Company (NYSE:GM) has shifted its focus to driver-assist technologies, which offer a faster path to revenue. This strategic pivot has shown promising results, with CEO Mary Barra noting that approximately 20% of the nearly 18,000 Super Cruise users opted to continue their subscription after their three-year trial period ended in 2024.
On February 26, General Motors Company (NYSE:GM) announced a 25% hike in its quarterly dividend, raising it to $0.15 per share. GM has consistently paid dividends since 2014, supported by its strong cash flow. In FY24, both its operating cash flow and free cash flow stood at $24 billion. As of March 14, the stock carried a dividend yield of 0.99%.
Overall, GM ranks 1st on our list of incredibly cheap dividend stocks to buy now. While we acknowledge the potential for GM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
