3 Undervalued Stocks Paying Decent Dividends
These are big stocks that currently trade at or below book value with low price-to-earnings ratios and pay dividends. It’s a sweet combination if you’re a worthy person.
If you’ve read and studied The Intelligent Investor by Benjamin Graham, you know the basics of identifying the “undervalued”. These are stocks that don’t get much attention on business channels or in business newspapers. It’s much more exciting and you get more viewers and readers when you write about Tesla
These are value stocks in the traditional sense:
The Bank of New York Mellon
It looked great after the pandemic lows of March 2020 and rallied through February this year before selling off significantly. In fact, the price is more than halfway to that dramatic low in early 2020.
At this level, Bank of New York Mellon can be bought for only 94% of its book value and with a price/earnings ratio of only 10.59. With the S&P 500 p/e now at 20, the big bank looks even more like a value stock.
They pay a dividend of 3.18%. Earnings per share are 8.30% this year and EPS growth rate over the last 5 years is 5.70%. Nothing fancy, but this is a big bank stock and they are positive.
It started 2020 at around 35 and is now trading in 2022 at around 31, but there has been quite a bit of action in between. If you connect the September 2020 low at 17 with the September 2021 low at 24, you get a definite uptrend line.
HSBC is trading today at just 63% of its book value, making it one of those big bank stocks that no one really wants to have in their portfolio. The price/earnings ratio is very stock market at 10.83.
Meanwhile, perhaps without much notice, the bank’s earnings this year are up 222.50% and the record for the past 5 years is positive at 56.80%. HSBC pays a dividend of 3.56%.
Webster is showing a powerful rally from the March 2020 lows that continues through the start of this year. After that big buying volume bar at the end of January, the stock started to pull back and here it is at 45.06 now.
You can buy as many shares as you want (probably) at this price which is only 84% of the bank’s book value. Webster’s price-earnings ratio of 14.48 is relatively low compared to almost any listing on, say, the hot NASDAQ
Investors receive a dividend yield of 3.55%.
These aren’t perfect situations, of course, but if value investing like Benjamin Graham and Warren Buffett sounds appealing, Bank of New York Mellon, HSBC and Webster might be worth investigating.
No investment advice. For educational purposes only.