These undervalued dividend stocks are poised for a rebound | Wilnesh News
Investors looking for income and potential capital appreciation may want to take a look at some underperforming dividend stocks. Due to high interest rates, investors have many options to earn income. In 2023, as the Federal Reserve raises interest rates, bond yields will rise sharply. The yield on 10-year government bonds is above 4%, and the yield on short-term government bonds of one year or less is above 5%. Still, dividend stocks tend to perform well during the economic recovery now underway, Bank of America recently said. This means that investors not only stand to gain, but may also see the stock price move higher. “We believe we are now in a total return world, where the contribution of dividends to total market returns is likely to be significantly higher than in the past decade, which was characterized by declining cash yields and elevated price returns,” Bank of America said. Equity and quantitative strategist Savita Subramanian wrote in a March 14 report. Investors should also look for companies with a history of increasing their dividends. CNBC Pro looks for stocks in the S&P 1500 that have paid higher dividends over the past year. They have increased their dividend in at least four of the past five years. To find those stocks that are undervalued, CNBC screened for stocks that are underperforming the S&P 500 and have forward price-to-earnings ratios below 21. At least 51% of analysts covering these stocks rate them a buy or overweight, and the average price target for these companies has room for at least 10% upside, according to FactSet. Here are the stocks: Mondelēz International currently has a dividend yield of 2.4% and has room for 20% upside from its average price target. Nearly 90% of analysts have a buy or overweight rating on the stock. The multinational snack company, whose brands include Oreo and Ritz, reported fourth-quarter profit in late January that beat expectations. However, Mondelēz International expects full-year organic net revenue to grow 3% to 5%. The company said in a statement that “volatility is greater than usual due to geopolitical uncertainty.” CEO Dirk Van de Put said in an interview with CNBC in February that consumers in the United States and Europe were also spending cautiously. To keep prices stable in an inflationary environment, the company often reduces pack sizes, he said. “People now understand they have to be careful about what they shop for, but they don’t want to cut back on their snacking habits,” he said on “Squawk on the Street.” Shares are down about 4% so far this year. On the other hand, Chesapeake Energy is up more than 16% year to date. The stock yields 2.5% and has nearly 14% upside from the average price target. About 65% of analysts have a buy or overweight rating on the stock, according to FactSet. In January, the natural gas and oil explorer announced an all-stock deal worth $7.4 billion to acquire natural gas producer Southwestern Energy. The deal is expected to close in the second quarter. The proposed merger is Chesapeake Energy’s latest attempt to emerge from bankruptcy in 2021. In 2022, the company acquired oil and gas producer Chief E&D to strengthen its position in the Marcellus Shale. Finally, investors can get a 2.8% dividend yield through regional bank East West Bancorp. About 93% of analysts have a buy or overweight rating on the stock. It has about 11% upside potential from the average price target, according to FactSet data. East West’s fourth-quarter profit in January missed expectations, but its net interest income topped consensus estimates, according to FactSet. Meanwhile, East West Chief Financial Officer Christopher Del Moral-Niles told CNBC in January that the company had emerged from last year’s regional banking crisis “stronger than ever.” “We’ve seen a lot of our competitors disappear, and we’ve seen a lot of them get acquired,” he told “Money Movers.” “The reality is that the market share landscape has shifted in our favor over the last year. direction.” Shares are up about 9% so far this year.