The stock market downturn that began early last year has left a lot of investors reasonably stressed out. That said, recent Fed rate hikes and looming recession fears aren’t making anything easier for us. However, because of these catalysts, several stocks look like bargain buys. While you are on the lookout for promising stocks, a great starting point is to look at undervalued dividend stocks to buy, since these companies can provide reliable passive income over time.
When it comes to choosing dividend stocks, quality matters. Smart investors are always on the lookout for stocks that pay steady dividends and also show long-term growth potential. The three undervalued dividend stocks listed here have impressive balance sheets and steady history of consistent dividend payouts.
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At the top of the list of undervalued dividend stocks to buy in 2023 is Chevron (NYSE:CVX). The oil and gas company has reported impressive numbers due to soaring energy prices. It is a global energy business that explores and produces oil and gas. Additionally, it operates midstream assets like processing plants and pipelines which aid its core business. Despite the recent decline in oil prices, the company managed to report better-than-expected numbers. It has raised its dividend distribution for 36 consecutive years.
Chevron posted close to $6.6 billion of net income in the first quarter, beating analyst expectations. One solid reason to bet on this company is its integrated business model which shows long-term potential. The company will have very favorable conditions for its oil and refined products in the near-term, and demand is only going to grow. After the surprise production cut announced by OPEC+ in April, the global supply of oil should be limited, driving prices higher, corresponding to profit increases for Chevron.
With a dividend yield of 3.8% and a quarterly dividend of $1.51, the stock is one of the best undervalued dividend stocks in the energy sector that’s worth buying.
Lennox International (LII)
Lennox International (NYSE:LII) is a company that manufactures and sells heating, ventilation, and air conditioning products. It is driven by 128 years of innovation in the industry and the majority of its sales are in North America.
Currently, LII stock is trading around $281 per share, up 27% over the past year and 17% year-to-date. Despite the market rout in 2022, LII stock has continued to outperform. Notably, the company’s shares are much lower than their all-time high of $350, suggesting potential upside on the horizon.
In its recently announced quarterly earnings, the company reported revenue of $1.05 billion and an operating income of $140 million. Further, its net income stood at $98.0 million and Lennox’s cash balance at the end of the quarter was $48 million.
Lennox generates impressive revenue from the residential HVAC market, and with new construction sales, it will see a rise in demand. That said, the company also works in the replacement segment, where it is seeing the most growth. It generates more income from replacements as compared to new construction. This means that no matter the market, this segment will continue to remain robust.
The company has raised dividends for 14 consecutive years and has a dividend yield of 1.5% and paid a quarterly dividend of $1.06. It has posted an annualized dividend growth of 16% over the past five years.
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Next on my list is Kellogg (NYSE:K), one of the best undervalued dividend stocks today. The consumer goods company is ready for a spinoff this year and I believe that the step will pay off. It plans to isolate the snacking business and will name the new business Kellanova. This move will help the company focus on business growth for both businesses. I think K stock is one of the cheapest dividend stocks to own right now.
Kellogg’s snack business makes up for about half of the total revenue of the company, and it will remain in focus for the rest of 2023. In 2022, the company saw 11% year-over-year growth in snack sales, driving an impressive 18th consecutive year of dividend growth. Indeed, Kellogg is a highly reliable dividend stock to add to your portfolio, considering the business has held strong despite recent market uncertainty.
Kellogg has a number of brands that drive profitability for the business and it has even managed to handle the inflation-led price bumps well. The spinoff has put the company in a strong financial position and the move could pay off in the long-term. The company has declared a dividend of 60 cents for this past quarter, representing the 394th consecutive dividend paid by Kellogg.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.
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