Unlock Attractive Yields with These 3 Undervalued Dividend Stocks
The S&P 500 has experienced an unprecedented two-year streak of 20%-plus annual gains, but corporate earnings haven’t kept pace, leading to inflated valuations. However, savvy investors can still find quality companies at compelling prices. Three dividend stocks stand out as particularly attractive opportunities: 3M, Essential Utilities, and Equinor.
A Trio of Undervalued Dividend Stocks
By investing equal parts in each of these stocks, you can expect to earn a 3.8% yield, roughly three times higher than the S&P 500 yield of 1.2%. Here’s why each stock is worth considering:
3M: A Value Opportunity in the Making
After years of underperformance, 3M’s stock surged 42% in 2024. With a 2.2% dividend yield, the company is poised for further growth as CEO Bill Brown’s revitalization plan takes hold. By restoring its reputation for innovative product introductions, improving operational performance, and implementing lean manufacturing techniques, 3M can unlock significant cash flow improvements. Trading at 16.3 times estimated 2025 earnings, 3M looks like an excellent value opportunity.
Essential Utilities: A Steadfast Commitment to Dividend Growth
Water utility stock Essential Utilities boasts a 3.6% forward dividend yield and a proven track record of 34 dividend increases over 33 years. With a 7% compound annual growth rate in dividend hikes from 2015 to 2024, investors can expect continued dividend growth. Operating primarily in regulated markets, Essential Utilities is well-positioned to achieve management’s projected 5% to 7% earnings per share growth from 2025 to 2027. At 12.4 times operating cash flow, a discount to its five-year average, Essential Utilities is an attractive buy.
Equinor: A Balanced Energy Stock with a Compelling Yield
Norwegian energy giant Equinor was the worst-performing integrated oil major in 2024, but its valuation has become increasingly attractive. With a 5.5% yield, Equinor plans to return $8 billion to $10 billion to investors in 2025, including $4 billion to $6 billion in buybacks. The company’s renewable energy investments, particularly in offshore wind, will play a crucial role in achieving its carbon reduction goals. Equinor’s healthy balance sheet, profitable oil and gas operations, and compelling valuation make it a standout energy stock for 2025.
Leave a Reply