The big investing news recently is the Fed’s long-awaited interest rate reduction. Although a strong jobs report has dampened hopes for another aggressive cut, rates will get lower in 2025. That should benefit capital-intensive industries like technology, but it will also trim your income on cash deposits.
You can counter the income change by shifting undeployed cash into dividend stocks, where yields will look more attractive as interest rates fall. That’s why this month’s undervalued stock list focuses on dividend payers—specifically, stocks that have a history of raising dividends over time. Below I highlight six dividend-payers that may be undervalued.
How These Undervalued Stocks Were Chosen
To identify these undervalued stocks, I screened the U.S. stock exchanges for companies meeting these criteria:
- Price-to-earnings (P/E) ratio below 15
- Price-to-book (P/B) ratio below 2
- Average analyst rating of buy or strong buy
- Price target upside of 10% or more
- Dividend yield of 3% to 5%
- History of dividend growth and consistent dividend payments
I ordered the resulting stocks from largest to smallest in terms of market capitalization. Note that oil and gas companies comprise half of this list, so these best stock picks are not intended to be a diversified portfolio. Proceed by researching each company’s business model and risk level to determine whether these stocks fit your investing parameters.
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6 Top Undervalued Stocks To Buy In November 2024
The table below introduces six dividend-paying stocks that appear to be undervalued. Market capitalization and business segment for each are also included.
Data source: Stockanalysis.com.
Below I’ll discuss each of these undervalued stocks in more detail. Stock prices and related percentages and ratios are as of October 6, with data sourced from StockAnalysis.com and MarketBeat.com.
For more value investing ideas, see best value stocks for 2024 and this list of attractive small-cap value stocks.
1. Comcast (CMCSA)
- Stock price: $41.14
- Average analyst price target: $46.23
- Price target upside: 12.4%
- P/E ratio: 10.9
- P/B ratio: 1.9
- Dividend yield: 3.0%
Business Overview
Comcast is a diversified media company that operates around the world. The company provides broadband and wireless connectivity services to consumers and businesses. Comcast also owns NBCUniversal, which produces and distributes entertainment content and operates theme parks.
Why CMCSA Is A Top Choice
Comcast stock is a frequent member of undervalued stock lists, partly because the company has struggled to demonstrate consistent growth in market value over the last few years. Still, there are important pieces in place. Comcast has reach, somewhat sticky connectivity customers and complementary businesses that should provide synergies.
Realizing those synergies has been a challenge for Comcast. This is one reason why some analysts have lowered their price targets recently. However, the company does generate significant cash, which funds a nice dividend and share repurchases. Shareholders who are willing can get paid to wait for Comcast to realize its potential. The current quarterly dividend of $0.31 is up from $0.27 in January 2023.
2. CVS Health (CVS)
- Stock price: $65.53
- Average analyst price target: $73.78
- Price target upside: 12.6%
- P/E ratio: 11.5
- P/B ratio: 1.1
- Dividend yield: 4.1%
Business Overview
CVS is a diversified healthcare business. The company owns a retail pharmacy and clinic network, manages pharmacy benefits and provides health coverage through Aetna, the health care payer CVS purchased in 2018.
Why CVS Is A Top Choice
CVS stock looks like a bargain, but investors disagree on the company’s outlook. CVS has had issues in all three business segments, from retail to health insurance. CNBC recently reported the company is weighing options to revive the business and maximize shareholder value.
The strategic review includes input from major shareholder and hedge fund Glenview Capital. Glenview owns about $700 million worth of CVS, so its team is motivated to maximize CVS’s value.
In response to disappointing earnings, CVS is working on reducing costs and repricing insurance premiums. As with Comcast, CVS shareholders can collect a competitive dividend while they wait for a turnaround to take shape.
3. U.S. Bancorp (USB)
- Stock price: $44.44
- Average analyst price target: $49.44
- Price target upside: 11.3%
- P/E ratio: 14.1
- P/B ratio: 1.4
- Dividend yield: 4.5%
Business Overview
U.S. Bancorp provides a range of financial services to individuals, businesses, agencies and other financial institutions. The service set includes depository accounts, credit cards, loans, mortgages, wealth management, treasury management, commercial loans and merchant services.
Why USB Is A Top Choice
Net interest margin or NIM is a primary profitability indicator for banks. This is the difference between the interest rate the bank charges on loans and the interest paid on savings accounts and certificates of deposits.
USB’s net interest margin in the second quarter of 2024 was 2.67, which is 20 basis points below the average for domestic banks. However, Morgan Stanley analyst Betsey Graseck points out that USB’s strength in variable-rate deposits will be an advantage as the Fed lowers interest rates. The rates on those deposits will fall, which should support higher NIM.
U.S. Bank additionally pays the highest dividend yield among these undervalued stock picks. The $0.50 per share quarterly dividend is up from $0.48 last year.
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4. Coterra Energy (CTRA)
- Stock price: $24.83
- Average analyst price target: $32.06
- Price target upside: 29.1%
- P/E ratio: 14.4
- P/B ratio: 1.4
- Dividend yield: 3.4%
Business Overview
Coterra Energy explores, develops and produces natural gas, oil and natural gas liquids (NGLs). The company’s assets are primarily in Texas, Pennsylvania and Oklahoma in the Permian Basin, Marcellus Shale and Anadarko Basin, respectively.
Why CTRA Is A Top Choice
Coterra has a history of disciplined capital deployment and operational efficiency. The company participates in the oil and natural gas markets, and can adjust production and capital allocation according to market conditions. This is an advantage CEO Tom Jorden describes as “significant investment optionality between oil and gas.”
In the second quarter of 2024, Coterra increased revenue 6.7% despite oversupply and lower pricing in the natural gas markets. Coterra also reaffirmed its commitment to returning at least 50% of its annual free cash flow to shareholders.
5. Murphy Oil (MUR)
- Stock price: $36.13
- Average analyst price target: $42.82
- Price target upside: 18.5%
- P/E ratio: 9.5
- P/B ratio: 1.0
- Dividend yield: 3.3%
Business Overview
Murphy Oil explores and produces oil and natural gas. The company’s exploratory assets are in Vietnam, Cote d’Ivoire, Brazil and the Gulf of Mexico. Producing assets are in Canada and the U.S.
Why MUR Is A Top Choice
In 2022, Murphy Oil’s leadership team announced a capital strategy to reduce debt, strengthen its balance sheet and return value to shareholders. Since the second quarter 2022, the company has reduced long-term debt to $1.2 billion from $2.2 billion. Total liabilities have also declined to $4.3 billion from $6 billion.
The company has also added to its share repurchase authorization and raised its quarterly dividend. The $0.30 dividend is up $0.05 from 2022. Going forward, Murphy will allocate at least 50% of its adjusted free cash flow to shareholder returns, with the remainder to fund balance sheet optimization.
6. Northern Oil And Gas (NOG)
- Stock price: $39.81
- Average analyst price target: $45.83
- Price target upside: 15.1%
- P/E ratio: 7
- P/B ratio: 1.9
- Dividend yield: 4.2%
Business Overview
Northern Oil and Gas acquires minority interests in premium oil and gas assets that are run by leading operators. By leaving the operations to other companies, NOG remains focused on deploying capital to high-potential drilling assets in the U.S. to deliver returns to shareholders.
Why NOG Is A Top Choice
NOG invests in high-return oil and gas assets but does not operate them. In this way, the company’s relatively small team can focus on evaluating acquisition opportunities and executing on the best of them. Also, the company’s position in the industry as the premium buyer of non-operated assets provides access to the best deals.
NOG owns roughly 300,000 acres and has completed almost $5 billion worth of acquisitions. Despite the sizable portfolio, the company delivers industry-leading operational efficiency.
In the second quarter, NOG reported revenues of $560 million, up from $476 million in the prior-year quarter. Income from operations declined to $218 million from $234 million due to higher production expenses and higher depletion, depreciation, amortization and accretion expenses.
After the quarter-end, NOG increased its share repurchase authorization by $150 million and raised its quarterly dividend 5% to $0.42.
Bottom Line
Dividend-paying value stocks can deliver income plus appreciation over time. Prioritizing companies that are committed to raising their dividend payouts can help you shift into a lower interest-rate environment in 2025 with ease.
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