The 3 Most Undervalued Dividend Stocks to Buy in May 2024


  • The following stocks feature impressive dividend growth track records yet trade at significant discounts.
  • Archer-Daniels-Midland (ADM): A recession-proof farm products provider boasting half a century of annual dividend increases.
  • Sonoco Products (SON): Its consistent revenue, earnings and dividend growth contrasts with its lagging share price.
  • Brookfield Infrastructure Partners (BIP): The company’s portfolio of critical assets can withstand current macro challenges.
Undervalued Dividend Stocks - The 3 Most Undervalued Dividend Stocks to Buy in May 2024

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Investing in dividend stocks is a great strategy for wealth accumulation, especially when coupled with the pursuit of undervalued opportunities. Interestingly, as we move further into May 2024, finding undervalued dividend stocks might seem hard since major indices are still hovering near all-time highs. Nevertheless, there are several such names.

Why? Well, with interest rates remaining elevated, investors continue to shift their focus towards higher-yielding fixed-income investments such as T-bills due to their improved risk-to-reward ratios. This exodus from dividend stocks toward securities with better risk/reward profiles elsewhere creates a fertile ground for income-oriented investors. It’s because it often leads to temporary undervaluation of dividend-paying equities.

As an investor, you can take advantage of this situation. Not only can you buy high-quality dividend stocks that generate a dependable stream of income, but you also get to enjoy the prospects of capital appreciation over time due to their discounted valuations.

The following three stocks have showcased great consistency of dividend growth and also seem notably undervalued, as their shares have come under pressure lately. This makes them prime candidates for investors looking for high quality undervalued dividend stocks.

Archer-Daniels-Midland (ADM)

Archer-Daniels-Midland (ADM) logo on sign at office campus
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Archer-Daniels-Midland (NYSE:ADM) has seen its shares come under heavy pressure in recent years. At just under $60 today, ADM stock trades notably below its 2022 highs of about $97 and close to the same levels it used to hover in the spring of 2021. Yet, as one of the largest agricultural processors and food ingredient providers globally, Archer-Daniels-Midland continues to post robust results quarter after quarter.

Its farm products, such as vegetable oils and sweeteners, as well as plant- and animal-based proteins, comprise essential ingredients for our nutritional needs. As a result, ADM stock features recession-proof qualities. It allows the company to post resilient results and grow its dividend in a remarkably consistent manner. In fact, ADM stock features more than five decades (51 years to be exact) of consecutive annual dividend increases!

ADM stock’s recent decline has compressed its forward price-to-earnings ratio (P/E) to just under 11, significantly below its historical average, and boosted its dividend yield close to 3.4%. Against its robust financials in recent quarters and solid prospects, ADM stock seems to be one of the most high-quality, undervalued dividend stocks out there.

Sonoco Products (SON)

A smartphone showing the logo for Sonoco Products (SON) in front of another version of the company logo.
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Sonoco Products (NYSE:SON) is another excellent candidate if you are searching for undervalued dividend stocks. In recent years, its shares have lagged behind, maintaining levels reminiscent of those seen back in 2018. Nevertheless, the South Carolina-based global packaging solutions provider has consistently grown its revenues, earnings and dividends. expanding them at a five-year compound annual growth rate of 4.7%, 8.6%, and 4.5%, respectively.

The contrast between Sonoco’s growing financials and lagging share price, while somewhat justified due to rising rates, forms a rather compelling investment case.

This disparity has resulted in SON stock currently trading at a forward P/E of about 10.8, notably below its five-year average of about 13.2. In the meantime, Sonoco is an esteemed Dividend Aristocrat, boasting 41 years of consecutive annual dividend increases. Due to its rather depressed valuation and exceptional dividend growth history and prospects, SON stock forms an intriguing case as an undervalued dividend stock.

Brookfield Infrastructure Partners (BIP)

Brookfield Infrastructure logo on a phone screen in front of a blurred computer screen. BIPC stock.
Source: T. Schneider / Shutterstock

Brookfield Infrastructure Partners (NYSE:BIP) is another great dividend stock that has fallen victim to rising interest rates. Before the Fed adopted a hawkish monetary policy in late 2022 to battle inflation, BIP stock used to feature an attractive, low-volatility share appreciation trajectory. Subsequently, BIP stock has experienced significant volatility and is now down close to its 2019 levels.

However, BIP’s financial performance tells a different story. Its revenues and funds from operations have consistently grown and hit new records last year. This success is backed by the company’s focus on owning and operating essential assets such as distribution networks, toll roads, ports and telecommunications infrastructure. Due to the predictable nature of these assets, BIP has grown its dividend for 15 consecutive years.

Overall, backed by a rich history of delivering strong shareholder returns, along with its generous 5.5% dividend yield and beaten-down share price, BIP rightfully earns the third spot on my list of most undervalued dividend stocks.

On the date of publication, Nikolaos Sismanis 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 Publishing Guidelines.

Nikolaos Sismanis is a professional research analyst with five years of experience in the field of equity research and financial modeling. Nikolaos has authored over 1,000 stock-related articles that focus on uncovering deep value opportunities, identifying growth stocks at reasonable valuations, and shining a spotlight on overlooked international equities.

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