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10 Best Undervalued Dividend Stocks to Buy Now

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·10 min read
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In this article, we will be looking at the 10 best undervalued dividend stocks to buy now. To skip our detailed analysis of these stocks, you can go directly to see the 5 Best Undervalued Dividend Stocks to Buy Now.

Finding truly undervalued stocks can be a difficult job, especially during times of economic crisis when already unpredictable markets may begin fluctuating even more. However, the concept and strategy known as value investing is one that has led to major successes for some in the market, including billionaire Warren Buffett, who is worth over $100.6 billion as of April 2021. The concept itself is easy enough to understand. Pioneered by Benjamin Graham, an American economist, value investing is a strategy that calls for selecting stocks that are trading at prices less than their intrinsic value. Investors who focus on such stocks, known as value investors, tend to pick up these stocks that seem to be underestimated in the market for a range of factors, while they are still trading at low prices. In essence, these stocks are picked up and held until it is possible to make a profit on them. This happens when stocks see prices surging, a development value investors hold out for.

However, it is no secret that this strategy has been successfully tried and tested since its inception. As such, investors today still continue to pour money into value stocks and value dividend stocks, that may positively impact their portfolios like Merck & Co., Inc. (NYSE: MRK), Pfizer Inc. (NYSE: PFE), NextEra Energy, Inc. (NYSE: NEE), and Moody's Corporation (NYSE: MCO). Reuters has, for instance, reported this August that even this year, US value stocks have proven to be popular among investor circles. With COVID-19 concerns fading, more investors are confident in the market and Treasury yields. The S&P 500 value stock index, for instance, has gained 5% since July. As for its performance throughout 2021 so far, the index has gained about 18% in spite of its slow start to the year.

At the end of the day, value stocks are continuing to remain popular especially as the economy revives itself. Analysts at JPMorgan have commented thus far that the S&P 500 value index may also "breakout" soon, while technical strategists at Truist as well have commented this August that value stocks can expect an upside in the next 12 months. As expectations for US GDP growth become more optimistic, with an expected 6.1% rise in the GDP in 2021, and a further 4.8% rise in 2022, according to Oxford Economics, the shift in attitude towards value stocks becomes easier to comprehend. For instance, Sameer Samana, a senior global market strategist at Wells Fargo Investment Institute, was reported to have said that with growth rates standing as they do at present, value stocks are expected to keep outperforming the market.

Investing has become difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Photo by Karolina Grabowska from Pexels

Without further ado, let's take a look at the 10 best undervalued dividend stocks to buy now.

Our Methodology

We have selected stocks considered to be undervalued on the basis of their price-to-book (P/B) ratios. Insider Monkey tracks the data of about 873 hedge funds, and we have also used this data to pick dividend stocks that are highly popular among hedge funds today. For each stock we have mentioned its yield and the number of hedge fund holders holding a stake in it, ranking them from the lowest to the highest dividend yield. Each stock mentioned has a payout ratio of less than 85% as well. Finally, we have used analysts' ratings to determine which stocks are favorably placed in analyst and investor circles, picking stocks with mostly positive ratings and strong fundamentals.

Best Undervalued Dividend Stocks to Buy Now

10. Summit Industrial Income REIT (OTC: SMMCF)

Number of Hedge Fund Holders: N/A Dividend Yield: 2.63%

Summit Industrial Income REIT (OTC: SMMCF) is an unincorporated open-end REIT. It ranks 10th on our list of the best undervalued dividend stocks to buy now. The company works to grow and manage its portfolio of light industrial and other properties within Canada.

This August, RBC Capital's Matt Logan raised his price target on shares of Summit Industrial Income REIT (OTC: SMMCF) to $18. The analyst also reiterated a Sector Perform rating on the stock at the same time.

In the second quarter of 2021, Summit Industrial Income REIT (OTC: SMMCF) had an FFO of $0.12. The company's revenue was $42.83 million, up 18.1% year over year and beating the previous quarter's revenue of $42.32 million. Summit Industrial Income REIT (OTC: SMMCF) has gained 59.65% in the past 6 months and 65.55% year to date.

Like Merck & Co., Inc. (NYSE: MRK), Pfizer Inc. (NYSE: PFE), NextEra Energy, Inc. (NYSE: NEE), and Moody's Corporation (NYSE: MCO), Summit Industrial Income REIT (OTC: SMMCF) is a good stock to invest in.

9. Macy's, Inc. (NYSE: M)

Number of Hedge Fund Holders: 35 Dividend Yield: 2.68%

Macy's, Inc. (NYSE: M) is an omnichannel retail organization and is next on our list of the best undervalued dividend stocks to buy now. The company operates a variety of stores, websites, and mobile applications under its brands by the names of Macy's, Bloomingdale's, and bluemercury. It ranks 9th on our list.

As of this August, Jefferies analyst Stephanie Wissink holds a raised price target on shares of Macy's, Inc. (NYSE: M). The new target is $27, compared to the previous $23 price target. Wissink also holds a Buy rating on the shares.

In the fiscal second quarter of 2022, Macy's, Inc. (NYSE: M) had an EPS of $1.29, beating estimates by $1.11. The company's revenue was $5.65 billion, up 58.67% year over year and beating estimates by $643.28 million. Macy's, Inc. (NYSE: M) has gained 40.99% in the past 6 months and 99.55% year to date.

By the end of the second quarter of 2021, 35 hedge funds out of the 873 tracked by Insider Monkey held stakes in Macy's, Inc. (NYSE: M) worth roughly $1.02 billion. This is compared to 31 hedge funds in the previous quarter with a total stake value of approximately $790 million.

Like Merck & Co., Inc. (NYSE: MRK), Pfizer Inc. (NYSE: PFE), NextEra Energy, Inc. (NYSE: NEE), and Moody's Corporation (NYSE: MCO), Macy's, Inc. (NYSE: M) is a good stock to invest in.

8. Principal Financial Group, Inc. (NASDAQ: PFG)

Number of Hedge Fund Holders: 18 Dividend Yield: 3.88%

Principal Financial Group, Inc. (NASDAQ: PFG) is a financial services company that offers a range of retirement, asset management, and insurance products and services to businesses, individuals, and institutional clients across the world. The company ranks 8th on our list of the best undervalued dividend stocks to buy now. It operates through its Retirement and Income Solutions, Principal Global Investors, Principal International, and U.S. Insurance Solutions segments.

This July, Credit Suisse analyst Andrew Kligerman upgraded shares of Principal Financial Group, Inc. (NASDAQ: PFG) from Neutral to Outperform. The analyst also raised his price target on the stock from $57 to $82.

In the second quarter of 2021, Principal Financial Group, Inc. (NASDAQ: PFG) had an EPS of $1.70, beating estimates by $0.18. The company's revenue was $3.61 billion, up 15.02% year over year and beating the previous quarter's revenue of $3.11 billion. Principal Financial Group, Inc. (NASDAQ: PFG) has gained 10.82% in the past 6 months and 34.61% year to date.

By the end of the second quarter of 2021, 18 hedge funds out of the 873 tracked by Insider Monkey held stakes in Principal Financial Group, Inc. (NASDAQ: PFG) worth roughly $217 million. This is compared to 31 hedge funds in the previous quarter with a total stake value of approximately $208 million.

Like Merck & Co., Inc. (NYSE: MRK), Pfizer Inc. (NYSE: PFE), NextEra Energy, Inc. (NYSE: NEE), and Moody's Corporation (NYSE: MCO), Principal Financial Group, Inc. (NASDAQ: PFG) is a good stock to invest in.

7. AltaGas Ltd. (OTC: ATGFF)

Number of Hedge Fund Holders: N/A Dividend Yield: 4.05% AltaGas Ltd. (OTC: ATGFF), a diversified energy infrastructure company operating in North America. It operates through its Utilities and Midstream segments and ranks 7th on our list of the best undervalued dividend stocks to buy now.

National Bank's Patrick Kenny this July raised his price target on AltaGas Ltd. (OTC: ATGFF) shares to $22.73. The analyst also reiterated an Outperform rating on the shares.

In the second quarter of 2021, AltaGas Ltd. (OTC: ATGFF) had an EPS of $0.063, beating estimates by $0.055. The company's revenue was $1.58 billion, up 89.6% year over year and beating estimates by $807 million. AltaGas Ltd. (OTC: ATGFF) has gained 25.47% in the past 6 months and 35.03% year to date.

Like Merck & Co., Inc. (NYSE: MRK), Pfizer Inc. (NYSE: PFE), NextEra Energy, Inc. (NYSE: NEE), and Moody's Corporation (NYSE: MCO), AltaGas Ltd. (OTC: ATGFF) is a good stock to invest in.

6. Mercury General Corporation (NYSE: MCY)

Number of Hedge Fund Holders: 14 Dividend Yield: 4.32%

Mercury General Corporation (NYSE: MCY), a financial services company, writes personal automobile insurance in the US alongside writing homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance. The company ranks 6th on our list of the best undervalued dividend stocks to buy now.

In the second quarter of 2021, Mercury General Corporation (NYSE: MCY) had an EPS of $1.13, beating estimates by $0.03. The company's revenue was $957.34 million, up 16.90% year over year and beating estimates by $134.34 million. Mercury General Corporation (NYSE: MCY) has gained 14.51% year to date and 29.75% in the past year.

By the end of the second quarter of 2021, 14 hedge funds out of the 873 tracked by Insider Monkey held stakes in Mercury General Corporation (NYSE: MCY) worth roughly $175 million. This is compared to 20 hedge funds in the previous quarter with a total stake value of approximately $178 million.

Like Merck & Co., Inc. (NYSE: MRK), Pfizer Inc. (NYSE: PFE), NextEra Energy, Inc. (NYSE: NEE), and Moody's Corporation (NYSE: MCO), Mercury General Corporation (NYSE: MCY) is a good stock to invest in.

Click to continue reading and see the 5 Best Undervalued Dividend Stocks to Buy Now.

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Disclosure: None. 10 Best Undervalued Dividend Stocks to Buy Now is originally published on Insider Monkey.