The stock market is at record highs. And more speculative growth names such as artificial intelligence-focused technology firms are skyrocketing. Some analysts are saying we could even see a bubble in the tech sector in 2024.
The good news, though, is that there are still plenty of rock solid investment opportunities in blue chip dividend stocks for investors today. While the market may be volatile this year, these undervalued dividend stocks are set to prosper for decades to come.
Qualcomm (QCOM)
Tech stocks are on a massive winning streak. Surprisingly, however, there are still some tech companies selling at fair prices while offering solid dividends.
Qualcomm (NASDAQ:QCOM) is one such example. It is the leader in semiconductors focused on the mobile communications space. The company built its business around 3G and 4G patents and infrastructure roll-out. It is now heavily involved in the 5G build-out as well, and it has also diversified into other fields such as its own Snapdragon chipset which powers mobile phones and tablets.
QCOM stock underperformed many of its tech peers over the past year due to a lull in smartphone sales. Telecom companies also slowed their spending on 5G deployments amid lower-than-expected returns on investment.
However, Qualcomm has irreplaceable telecom assets. It also has intriguing technology in other fields such as AI-powered mobile semiconductor chips. All this to say that once smartphone sales pick back up, Qualcomm shares should surge toward new highs. Shares also yield more than 2%.
Cisco Systems (CSCO)
Qualcomm isn’t the only cheap tech stock with dividends. Networking gear giant Cisco Systems (NASDAQ:CSCO) is another such example.
Cisco, as it turns out, was one of the hottest stocks during the dot-com bubble, and the company briefly became the world’s most valuable firm. Since then, Cisco has dramatically underperformed as internet routers turned from a glamorous field to a commodity. We could wonder whether several of today’s high-flying tech stocks will later turn into commodities and see their valuations tumble in the years to come.
Regardless, Cisco has now become a far more trustworthy investment. Not surprisingly, the company’s revenues have continued to grow as the internet needs more and more infrastructure. The pandemic drove further adoption of technologies such as remote working and studying which drove additional demand for Cisco products.
The company has wisely pivoted toward software and recurring revenue businesses such as cybersecurity. This should make Cisco more valuable as its revenue mix shifts toward higher margin and more predictable sources. The company also just announced a new partnership with Nvidia (NASDAQ:NVDA).
Even as Cisco’s business quality has improved, the valuation has remained at a deep discount. CSCO stock sells for just 13 times earnings today and offers a greater than 3% dividend yield.
Hormel Foods (HRL)
Investors will often discard Hormel Foods (NYSE:HRL) considering that it is most known for its SPAM canned pork product. However, investors should give the protein company a second look.
Quietly, Hormel has totally reshaped its brand portfolio over the past 20 years. It has made numerous acquisitions to pick up products which appeal to millennials and Gen Z shoppers. Hormel is now a leader in low-fat turkey, natural and organically raised meats, Mexican salsas and ready-to-eat guacamole, and nuts and nut butters.
Hormel’s unique insight is that it prefers to dominate niche products rather than being one of many competitors in big categories like cereal or cookies. This makes Hormel more immune to threats such as store brands or online commerce.
Hormel shares have plummeted over the past 24 months. Margins have fallen as commodity meat prices soared due to the inflationary wave and Russia’s invasion of Ukraine. Once this normalizes, though, Hormel’s profitability should pick back up. The company has increased its dividend for more than 50 years in a row and shares now yield almost 4%.
Pfizer (PFE)
Pfizer (NYSE:PFE) is a leading dividend stock to own today. Shares of the pharmaceutical giant are selling near multi-year lows and yield more than 6%.
It’s understandable why investors are frustrated with PFE stock. COVID-19 vaccines have largely run their course, revenues have dropped sharply from the 2021 and 2022 peak years. At first glance, it might seem that Pfizer would be adrift without the vaccine-related revenues.
But that seems like a mistake. Pfizer’s revenues jumped from $41 billion in 2019 to $58 billion in 2023, and analysts see that rising to $60 billion this year and $63 billion in 2025. That is to say that Pfizer was able to use its vaccine windfall to develop other profitable lines of business and the company should be worth more today than it was in 2019.
Instead, PFE stock is down from $37 to $28 since January 2020. This has made this blue chip healthcare leader a compelling bargain with a huge dividend.
Wells Fargo (WFC)
Wells Fargo (NYSE:WFC) is one of the big banks that is thriving among the industry’s current crisis. To be sure, there are some bank stocks which investors should exit today — there are real risks out there.
However, Wells Fargo is a safe harbor in the storm. That’s because Wells Fargo did not aggressively expand its balance sheet or buy overvalued securities over the past few years. Banks that were positioned poorly, like First Republic and Silicon Valley, ended up going bust. But the more prudent ones, like Wells Fargo, are poised to profit as the industry consolidates.
The company just reported another strong earnings result recently. The dividend is rock solid and the bank is buying back lots of stock as well. As the company continues to put its past scandals behind it, shares should rally sharply in coming years.
Pinnacle West Capital (PNW)
Pinnacle West Capital (NYSE:PNW) is a U.S. utility holding company that owns Arizona Public Service and Bright Canyon Energy. Investors have generally favored utilities in Sunbelt states such as Arizona thanks to outsized population growth and new industries. The Phoenix area, for example, is enjoying an influx of electric vehicles and semiconductor firms; both of these should bring tons of jobs to the area in the decades to come.
While the long-term outlook is bright, PNW stock has entered a short-term slump. Utility stocks, in general, have underperformed due to high-interest rates.
Pinnacle West also faces regulatory review from the state’s controversial utility commission. These factors have combined to push PNW stock to near 52-week lows; it yields more than 5% today.
McCormick (MKC)
Hormel isn’t the only cheap food stock today. Spice giant McCormick (NYSE:MKC) is another packaged foods company that is on sale.
The whole category sold off in 2023 in large part due to worries around GLP-1 weight loss drugs. This is understandable to an extent; it’s not hard to see how the weight loss phenomenon could lower sales of soft drinks and junk food.
This narrative makes no sense for McCormick, however. The company’s bread and butter are spices which have few or no calories. It has also made a big push into hot sauces with its purchases of Frank’s Red Hot and Cholula in recent years. McCormick brings consumers goods which make their foods taste better without adding unnecessary calories. Yet MKC stock has gotten dumped along with the rest of the sector. That has pushed McCormick, a Dividend Aristocrat, to near multi-year lows.
On the date of publication, Ian Bezek held a long position in MKC, HRL, WFC, PFE, and QCOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
