I found the 17 most undervalued S&P 500 stocks (big dividends)
Let’s talk about the top 17 most undervalued dividend stocks on the S&P 500, and why I’m taking a huge risk buying them heading into 2024.
Now the reason I say it’s a huge risk is because these stocks are so beat up that they have some of the UGLIEST charts you’ll ever see, and frankly, any of them could turn out to be a huge value trap.
Value traps are stocks that look super underpriced at first blush, but might actually be terrible investments due to deteriorating business conditions.
I also believe we’re probably headed into a monster recession in 2024, which could put huge downward pressure on equities.
HOWEVER, I’m obsessed with finding value, trade ideas, and passive income opportunities like dividend stocks, so I’m willing to roll the dice small on some of these.
So what I did back in mid-October was check every single stock in the S&P 500 against the numbers provided by my broker’s quantitative analysis service and then started making small buys on significant dips.
And the result so far?
Well, my Pure Dividends portfolio has absolutely CRUSHED the S&P 500 since I started building it:
I’m going to count down the top 5 most undervalued stocks according to that QA (discounted price at the time), and then I’ll tell you how I intend to test the buy low, sell high strategy in real life.
Then I’ll tell you about the rest of the list.
These dividend stocks range from fintech to specialty chemicals, to skateboard shoes to food ingredients, but they all have one thing in common — they’re deeply unpopular right now.
Before we get going, I just want to say I’m not a financial advisor and this is not financial advice.
I’m not telling you to buy or sell any of the securities listed below — I’m just a guy who likes to talk about trade ideas and his portfolio.
Speak to a financial professional before making money decisions and never bet money you can’t afford to lose.
All numbers that follow were taken when I started building the portfolio in October.
The fifth most undervalued dividend stock in the S&P 500: CMA
The fifth most undervalued dividend stock in the S&P 500 may not come as a surprise given the turmoil in the regional banking system over the past year.
The collapses of Signature Bank and Silicon Valley Bank have given a lot of people cold feet around small cap banks, and with good reason — no one loves to see their investments go to zero.
But crashes also provide opportunities to pick up companies at a discount, so I’ll take a flyer on this one.
Comerica Incorporated (CMA) is a Texas-based bank that provides a wide range of commercial, retail, and wealth management financial services.
Market cap: $5.75 billion
Discount: 49%
Dividend yield: 6.51%
1 year performance: -38.92%
The fourth most undervalued dividend stock in the S&P 500: ZION
Along the same lines, we have another small-cap bank in Zions Bankcorporation (ZION). Like Comerica, it provides a wide range of financial services and operates primarily in the Western United States.
Market cap: $5.09 billlion
Discount: 49%
Dividend yield: 4.77%
1 year performance: -32.77%
The third most undervalued dividend stock in the S&P 500: GM
General Motors was already beat up before signing expensive new union contracts, and it’s been punished even more ever since. After reaching a post-COVID high of about $65 per share, GM’s price has been cut all the way down to $28. Value trap or amazing opportunity? I intend to find out.
Market cap: $38.48 billion
Discount: 54%
Dividend yield: 1.28%
1 year performance: -29.56%
The second most undervalued dividend stock in the S&P 500: PARA
Now we get into some fun ones. Picking up the silver medal on our list is entertainment company Paramount Global. Paramount has a lot of irons in the fire, from television (CBS, Nikelodeon, BET, etc.) to streaming (Paramount+) to entertainment production.
Paramount has actually had a big pop since I first searched these numbers in October and is my best-performing stock on this list (more on that in a bit).
Market cap: $9.37 billion
Discount: 56%
Dividend yield: 1.41%
1 year performance: -23.79%
The most undervalued dividend stock in the S&P 500: VFC
If you grew up when I did (the 1990s), you’ll be familiar with Vans.
It was the only shoe brand I wore and was deeply ensconced in the skate culture of the time.
Unfortunately, that brand, along with the others owned by VFC — The North Face, Timberland, Smartwool, Icebreaker, Altra, Supreme, Kipling, Napapijri, Eastpak, JanSport, Dickies — haven’t been able to keep the share price afloat of late.
In fact, this is one of the uglier charts you’ll ever see. VFC’s share price flirted with numbers not seen since the Great Recession.
One rule of thumb traders typically follow is “don’t try to catch a falling knife”, so trying to predict a bottom on this one could ultimately be a very stupid undertaking.
But this is just a fun experiment for me, not the foundation of my retirement portfolio.
Market cap: $6.48 billion
Discount: 59%
Dividend yield: 2.16%
1 year performance: -48.77%
The rest
Here’s the rest of the top 18 most undervalued stocks on the S&P 500 according to the QA I used in October.
KeyCorp (KEY)
Business: Banking
Discount: 48%
Yield: 6.82%
Wallgreens Boots Alliance (WBA)
Business: Pharmacies
Discount: 45%
Yield: 9.28%
Albermarle (ALB)
Business: Specialty chemicals
Discount: 45%
Yield: 1.26%
Bath and Body Works (BBWI)
Business: Body care products retailer
Discount: 44%
Yield: 2.70%
International Flavors & Fragrances (IFF)
Business: Ingredients manufacturing
Discount: 44%
Yield: 4.32%
FMC Corporation (FMC)
Business: Agricultural sciences
Discount: 43%
Yield: 4.37%
Dollar General (DG)
Business: Discount retailer
Discount: 43%
Yield: 1.89%
Estee Lauder Companies (EL)
Business: Beauty products
Discount: 41%
Yield: 2.15%
Truist Financial Corportation (TFC)
Business: Banking
Discount: 41%
Yield: 6.61%
AES Corporation (AES)
Business: Energy utility
Discount: 40%
Yield: 3.92%
Ford Motor Company (F)
Business: Motor vehicles
Discount: 40%
Yield: 5.85%
Tapestry (TPR)
Business: Lifestyle products
Discount: 40%
Yield: 4.61%
Performance so far
I started making fractional buys on these stocks in October on red weeks, and as you saw at the top, that strategy has paid off so far.
Now frankly I’m not overly confident in this strategy and I could very well lose a lot of money, but I’m committed to trying it for a year and seeing what happens.
If they continue to drop, I’ll average down and then take an L and dump them.
But if they recover and maintain their dividends, it could wind up being a pretty nice passive income investment portfolio.
I promise I’ll do an update here at the end of the project, so if you’re interested in seeing how this all turns out, please be sure to subscribe to my feed.
Hey, thanks for reading! If you enjoyed this piece, please give it a clap or two so others can find it! Got a dividend strategy of your own? Let me know in the comments!
Disclaimer: Numbers in this post were accurate at time of writing and will not be accurate at time of reading. The author of this article is not a financial advisor. This commentary is provided for general informational and entertainment purposes only and should not be construed as financial, investment, tax, legal or accounting advice. It does not constitute an offer or solicitation to buy or sell any securities referred to. Consult your financial advisor prior to making financial decisions.
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