It seems like 2021 has been the best of times and the worst of times on Wall Street.
While stimulus checks are dropping into checking accounts and vaccines are slowly but surely distributed across the U.S., there remain lingering fears of economic struggles as well as the potential risk of inflation. Throw in the fact that it was a very good year for stocks in 2020 despite the pandemic, and some investors are wondering if their previously high-growth stocks have gotten ahead of themselves.
Just because there may be uncertainty doesn’t mean all stocks are set to take a dive. Here are five undervalued dividend stocks that should offer stability as well as regular payouts for income investors:
— CVS Health Corp. (ticker: CVS)
— EOG Resources (EOG)
— Invesco (IVZ)
— Olin Corp. (OLN)
— Synovus Financial Corp. (SNV)
CVS Health Corp. (CVS)
Current yield: 2.73%
CVS has become much more than a retail drugstore, with its Minute Clinics offering acute care services.
This now includes vaccination to help fight COVID-19. In fact, the company’s most recent earnings report notes CVS has administered more than 3 million vaccines. This vaccination trend is a nice short-term bump, but the bigger appeal to value-oriented investors should be the fact that customers will keep coming back for day-to-day prescription needs for many years to come. To top it off, CVS also offers pharmacy benefit management solutions and primary care insurance after the 2018 purchase of Aetna.
Add in a forward price-to-earnings ratio of about 9 right now, less than half the forward P/E ratio of about 22 for the S&P 500, and it’s clear there’s a ton of intrinsic value in this stable health care play.
EOG Resources (EOG)
Current yield: 2.27%
EOG Resources is an energy exploration firm that produces crude oil, natural gas and natural gas liquids.
In the U.S., its principal producing areas are in New Mexico and Texas, but the company also has operations in the Middle East, China and the Caribbean. Energy stocks can be quite volatile, and EOG is no exception. However, with roughly 90% gains in the last 12 months, EOG has proven it isn’t as risky as other stocks in the sector. Furthermore, with some 20 trillion cubic feet of natural gas in the U.S. shale formations where EOG is involved in “fracking,” there is a huge store of value in the proven reserves of this energy company.
Financial services firm Morningstar currently has a $94 fair value estimate for EOG’s stock — that’s around 30% higher than shares currently trade. Natural gas is an important transition energy source in the fight against climate change since it’s relatively cleaner than oil or coal, so EOG still has a lot to offer long-term investors looking for a stock that is being discounted in the current environment.
Current yield: 2.67%
Investment management firm Invesco is perhaps best known for its Invesco QQQ Trust ( QQQ), an exchange-traded fund linked to the Nasdaq-100 index with more than $150 billion in assets under management.
IVZ is not a huge shop like Vanguard or Fidelity, but it is still a successful firm with a powerful portfolio of products that are in demand right now.
What’s more, it has a forward P/E ratio of around 9 right now, meaning Wall Street isn’t putting much of a premium on its shares. Consider that investment giant BlackRock ( BLK), which runs the popular iShares family of ETFs, commands a forward P/E ratio of nearly 20 right now. That makes IVZ a much better value by this metric, meaning it could have continued upside in 2021.
Olin Corp. (OLN)
Current yield: 2.28%
You may not be familiar with $6 billion chemicals player Olin Corp., but with gains of more than 250% in the last year, it may be time to sit up and take notice of this sleepy materials stock.
Its business isn’t particularly thrilling, as it involves the manufacturing of things like vinyls and epoxies. The company is also a leading manufacturer of ammunition, but the Winchester segment is just 16% of total revenue, so the core operations are not related to the firearms business.
This chemicals focus makes OLN a reliable company — so reliable it just declared its 377th consecutive quarterly dividend at the beginning of 2021 — and it has a comparatively low forward P/E ratio of around 13.
Synovus Financial Corp. (SNV)
Current yield: 2.99%
Synovus is a Georgia-based regional bank that isn’t involved with the sophisticated propriety trading techniques or other actions you’ll find at U.S. megabanks.
Instead, its business is core lending operations like mortgage origination or small business loans along with the hum-drum offerings of financial institutions including savings accounts, debit cards and the like. This is not a high-growth business, but it does provide a stable store of value to shareholders.
In 2019 and 2020, SYN made roughly $2 billion each fiscal year in interest income. Considering that rates are steadily trending higher, that bodes well for this financial stock in 2021. If you’re looking for a reliable and lower-risk pick in the financial sector, Synovus is worth a look.
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