Dabbling in the vast ocean of stock market investing, savvy players continue to be drawn by the allure of undervalued dividend stocks. These attractions could prove irresistible, particularly for those plotting a long-term investment course where valuation and investment return assume a towering significance over time. Yet, the landscape is strewn with dividend stocks offering unsustainable distributions, which could trap investors.
Hence, the quest for firms with a robust business model that can uphold their distribution over the long haul becomes massive. Investors get a generous safety net when wagering on shares of undervalued enterprises, not to mention a heftier dividend yield. Discovering such stocks may seem akin to looking for a needle in the haystack, but it’s worth the effort.
Therefore, investing for income is a strategic play that could offer massive long-term rewards. Investing in undervalued dividend stocks puts you in that sweet spot where prudence meets reward.
Prudential (PRU)
Prudential (NYSE:PRU) is a behemoth in the global financial services realm, continuing to pique investor interest with its tenacity and overall robustness. Despite kicking off 2023 on a rough note, PRU stock is down roughly 8% year-to-date. Much of that has to do with the steep drop in reported revenue and earnings each quarter last year. Nevertheless, its recent record suggests the company continues to navigate choppy waters with its impressively diversified portfolio with aplomb.
Prudential made a statement with a net income of $1.46 billion and revenue of $15.9 billion in its first quarter. Evidently, the firm is back in the saddle, ready to ride the bull market again. Despite its resilience, the stock is trading at just 0.6 times forward sales estimates while yielding a mighty impressive dividend yield of almost 5.5%. Moreover, its dividend payout has risen by 14 consecutive years, significantly adding to its allure.
Bank of America (BAC)
Bank of America (NYSE:BAC) is effectively riding the turbulent currents of the financial industry. The firm has showcased an admirable knack for charting a path forward, emerging stronger from every challenge that’s come its way. The Silicon Valley Bank debacle in March could have thrown a lesser entity off course, but BAC stood tall amidst the turmoil. Moreover, it welcomed a torrential influx of $15 billion in deposits as investors sought the sturdy shelter of an established player.
BAC delivered spectacular results in the first quarter, blowing past analyst estimates on both lines. The bank’s robust earnings per share growth, a substantial hike in net interest income, and stellar revenue growth across all segments effectively bolster its long-term position. With it managing a whopping $3 trillion in assets and a savory dividend yield of more than 3%, it would be wise to have BAC stock in your portfolios now.
Public Storage (PSA)
Public Storage (NYSE:PSA) is a popular real estate investment trust (REIT) specializing in acquiring and maintaining self-storage properties. Its business has done remarkably well despite the crippling economic headwinds. Moreover, the firm has reported funds from operations (FFO) of $4.08 per diluted share in the first quarter, a key measure for REIT investors in examining the dividend’s safety.
Its robust $4.08 FFO per share comfortably outpaces its quarterly dividend, indicating strong coverage. Additionally, Public Storage showcased strong growth, with its FFO and revenues soaring by 11.8% and 12.4% year-over-year, respectively, in the first quarter of 2023. This pattern points to a healthy financial trajectory for this REIT. Moreover, its 4-year average dividend yield is at an extraordinary 4.1%, backed by industry-leading growth numbers. Additionally, analysts at TipRanks rated the stock as a Moderate Buy with about a 9% upside from current levels.
Northrop Grumman (NOC)
Northrop Grumman (NYSE:NOC) is arguably one of the best defense contractors known for its steady and dependable dividend payout. It channeled over 70% of its free cash flow into dividends last year, a testament to its shareholder commitment.
The company has effectively surpassed first-quarter expectations despite some turbulence, as evidenced by profit declines across key business units such as mission and aeronautics systems. It reported earnings per share of $5.50 on revenue of $9.3 billion, beating out the forecasted $5.09 on $9.2 billion. Particularly, its space unit offers a ray of optimism, with first-quarter sales skyrocketing 17% year-over-year. Impressively, its revenue eclipses that of the aeronautics division by over 35%.
NOC stock is down almost 16% year-to-date, offering a powerful dividend yield of 1.7%, with consecutive dividend growth for almost 20 years.
Agnico Eagle Mines (AEM)
Rising above cost and workforce challenges, Agnico Eagle Mines (NYSE:AEM) posted robustly in the gold production sphere last year. Hailed as the third-largest gold producer globally, the firm effectively showcased strong cost control and strategic expansion projects, leading to record-breaking margins. Notably, Agnico Eagle has maintained its position in lucrative mining jurisdictions and witnessed significant production growth compared to its peers.
Moreover, with an array of projects in the U.S. and Colombia lined up and aimed at augmenting its gold and silver production profile, the firm is set for long-term growth expansion ahead. While rising costs due to persistent inflation could be considered a risk, Agnico Eagle seems well-equipped to manage labor and other costs. Additionally, the company offers a healthy and sustainable dividend yield, exceeding the 3% mark for its shareholders. With minimal political risk and a low valuation, the stock emerges as an appealing buy.
Restaurant Brands (QSR)
Restaurant Brands (NYSE:QSR) boasts a robust global footprint, operating around 29,000 restaurants in over 100 countries. The company continues to demonstrate impressive financial health with encouraging numbers across both lines. Consolidated total revenues and adjusted EBITDA grew over 9.5% and nearly 11% for the first quarter year-over-year, comfortably outpacing sector averages. Moreover, it has been an excellent performer in the stock market in the past year, generating a total return of 56% compared to the S&P 500’s of just 21%.
Furthermore, in its first quarter, it reported a notable year-over-year increase in sales to $1.59 billion, alongside a net income of $277 million. The driving forces behind this success lie in the company’s diverse brand portfolio and the massive scale at which it operates.
Hence, with its international presence and commitment to continuous operational improvements, QSR stock represents one of the best income stocks at this time. Additionally, it offers a 2.79% yield with seven years of consecutive payout growth.
Kellogg (K)
In the world of consumer stocks, Kellogg (NYSE:K) has been somewhat static, with its stock dipping 5% over the last five years with only a modest increase of 2% in the past decade. That stagnation stems from limited growth in its traditional cereal business, which faces challenges due to changing consumer behaviors and increased competition.
The company wants to spin off its cereal business from its other faster-growing consumer products, particularly snack items. The business will split its high-growth sections into a new entity named “Kellanova,” while rebranding its cereal branch as “WK Kellogg Co.”
For investors, this could present a strategic opportunity wager on K stock before the split at the end of 2023. Moreover, despite recent challenges, the company has maintained a solid track record of 18 consecutive years of dividend growth, yielding an appealing 3.5%.
On the date of publication, Muslim Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
