In this article, we will take a look at some of the best dividend stocks that are incredibly cheap.
Value investing has long been a preferred strategy among investors, largely influenced by Warren Buffett, who continues to seek out stocks he believes are trading below their intrinsic value. While growth stocks have recently captured more market attention, value stocks have demonstrated strong long-term performance.
Investment experts such as Josef Lakonishok and David Dreman have emphasized the importance of patience and a disciplined approach, arguing that steady, well-researched investments often yield better results than chasing rapid growth. Their research suggests that value investing outperforms growth strategies about 70% of the time, regardless of a company’s size. Examining businesses across different market capitalizations, they found that, over extended periods, value stocks consistently delivered average annual returns exceeding 7%, outperforming their growth counterparts.
Also read: Dividend Contenders List: Top 15
Lowell Miller’s book, Single Best Investment, explored the principles of value investing, drawing on the research of Fama and French published in the Journal of Finance. The book explained that when a growth stock fails to meet investors’ high expectations, its price often experiences a steep drop as the market reassesses its true worth. On the other hand, value stocks, which typically start with lower expectations, have the potential to surpass forecasts, leading to upward price adjustments. However, the book also underscored the importance of diversification, cautioning against concentrating too much capital on a single investment. Historically, a well-diversified portfolio has proven to be a safer strategy for investors.
A report by BlackRock highlighted that value stocks can provide stability in volatile market conditions. This was evident during the 2022 market downturn when growth stocks suffered heavy losses, while value stocks experienced comparatively smaller declines. By nature, value stocks tend to trade at lower price levels than growth stocks, though the size of this discount has fluctuated over time.
Market analysis suggests that value stock valuations would need to rise by over 40% to return to their historical median, signaling potential upside if they regain investor favor. With growth stocks trading at high valuations, investors may increasingly shift their focus toward value stocks, particularly as the market broadens beyond mega-cap companies. While past performance does not guarantee future outcomes, history provides some perspective. BlackRock noted that the last time the valuation gap between the Russell Growth and Russell Value indexes was as wide as it is today—back in December 2000—value stocks went on to outperform growth stocks over the subsequent one-, three-, and five-year periods.
Dividend-paying value stocks can appeal to investors looking for a combination of steady income and growth potential. These stocks are often associated with well-established companies that, despite being undervalued by the market, continue to demonstrate solid financial strength. In this article, we will take a look at some of the best dividend stocks that are incredibly cheap.
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Our Methodology:
For this list, we used a Finviz screener and identified dividend companies with forward P/E ratios below 11, as of March 14. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected 12 companies with strong dividend histories and solid balance sheets. The stocks are ranked according to their forward P/E ratios.
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12. Bank of America Corporation (NYSE:BAC)
Forward P/E Ratio as of March 14: 10.72
Bank of America Corporation (NYSE:BAC) is an American financial services company. It operates across multiple industry segments, including consumer and commercial banking, capital markets and investment banking, and wealth management. With a history spanning over a century, it has demonstrated long-term resilience. One of its key advantages is its scale—bringing in $102 billion in revenue in 2024 and closing the year with an impressive $3.3 trillion in assets. This sheer size gives the company an edge over smaller competitors by allowing it to manage operating costs more efficiently. In addition, its investments in marketing and digital initiatives tend to have a broader reach and greater impact.
Bank of America Corporation (NYSE:BAC) has consistently remained profitable, a quality that shouldn’t be overlooked. Over the past five years, its net profit margin has averaged an impressive 27.9%. The ability to generate positive net income in nearly any economic environment is a strong advantage for any company. In the fourth quarter of 2024, the bank’s net income more than doubled to $6.7 billion, up from $3.1 billion a year earlier. It also grew its customer base, adding 213,000 new consumer checking accounts—continuing a six-year streak of quarterly growth. On top of that, the bank returned $2 billion to shareholders through dividend payments.
Bank of America Corporation (NYSE:BAC), one of the best dividend stocks, has been growing its dividends for 11 consecutive years. The company has also been paying uninterrupted dividends to shareholders for the past 27 years. It currently offers a quarterly dividend of $0.26 per share and has a dividend yield of 2.54%, as of March 14.
11. Merck & Co., Inc. (NYSE:MRK)
Forward P/E Ratio as of March 14: 10.52
Merck & Co., Inc. (NYSE:MRK) is a New Jersey-based multinational pharmaceutical corporation. The company has a strong portfolio, headlined by Keytruda, the world’s top-selling drug for cancer treatment. It is also a major player in the animal health sector. Its history of success speaks for itself—developing new medicines is both costly and uncertain, yet Merck has consistently brought innovative treatments to market. This steady performance has supported reliable revenue and earnings growth, enabling the company to increase its payouts over time.
Merck & Co., Inc. (NYSE:MRK) delivered solid financial results, with revenue climbing 7% year-over-year to $15.6 billion. The company has expanded its footprint in specialty pharmaceuticals and oncology, with Keytruda remaining a crucial player in cancer treatment and a major driver of revenue growth. Merck’s strong market position has allowed it to generate steady cash flow, reinforcing its commitment to shareholder returns. For the full year, Keytruda sales surged 18% from the previous year, reaching $29.5 billion.
Merck & Co., Inc. (NYSE:MRK)’s quarterly dividend currently comes in at $0.81 per share for a dividend yield of 3.43%, as of March 14. It is one of the best dividend stocks on our list as the company has increased its dividends for 14 consecutive years.
10. U.S. Bancorp (NYSE:USB)
Forward P/E Ratio as of March 14: 9.32
U.S. Bancorp (NYSE:USB) is an American bank holding company, headquartered in Minnesota. The company offers a broad spectrum of financial services, including commercial and consumer banking, payment solutions, wealth management, and investment services. The bank prioritizes operational efficiency and effective balance sheet management, both of which play a crucial role in maintaining long-term profitability.
In the fourth quarter of 2024, U.S. Bancorp (NYSE:USB) delivered slightly better-than-expected results, surpassing Wall Street forecasts. Earnings per share (EPS) came in at $1.07, edging past analysts’ estimates of $1.05, while revenue reached $7.01 billion, just above the projected $7 billion. Despite an uncertain economic landscape and regulatory shifts, the company saw solid net income growth. The results underscore its ability to navigate challenges effectively, demonstrating improved efficiency and financial resilience. Its net interest income saw a modest rise to $4.18 billion, driven by effective repricing strategies, though its net interest margin dipped slightly to 2.71%. The company also continued to invest in financial technology, showcasing this commitment with the rollout of Elavon’s cloud-based payment gateway.
On March 11, U.S. Bancorp (NYSE:USB) declared a quarterly dividend of $0.50 per share, which fell in line with its previous dividend. Overall, the bank has raised its payouts for 14 years in a row, which makes USB one of the best dividend stocks. As of March 14, the stock has a dividend yield of 4.76%.