Dividend stocks are known to be somewhat static as they’re often mature companies with stable business models and established market footprints. Investing in quality dividend stocks with the potential to appreciate can be very appealing for risk-averse investors with a decade or more before retirement. With a modest 10% CAGR, you could be sitting on a million-dollar portfolio, churning out 50k, 100k, or more in dividends yearly in retirement.
So, today, let’s find some quality, undervalued dividend stocks that have the potential to skyrocket in 2025 and beyond.
How I Screened For The Following Stocks
Like always, I start with Barchart’s Stock Screener feature to comb the markets for likely candidates. I used the following filters for screening:
- 14-day Relative Strength Index: 40% and below. The relative strength index, or RSI, is a popular technical analysis tool used to identify if an asset is oversold or overbought relative to all its trading prices over the last 14 days. Overbought levels are 70% and above, while oversold levels are 30% and below. I set the ceiling to 40% to get oversold and near-oversold stocks showing signs of recovery.
- Current Analyst Rating: 3.5 (Moderate Buy) to 5 (Strong Buy).
- Number of Analysts: 10 or more. The more analysts agree with the buy assessment, the better.
- Annual Dividend Yield: 3% or more.
After running the scan, I got seven companies matching the criteria. I arranged them from lowest to highest 14-day relative strength index and will start with number one:
Ally Financial (ALLY)
14-day RSI: 39.49
Ally Financial is a purely online financial services company primarily focused on digital banking, auto financing, and mortgage lending. It offers a range of products, including online savings accounts, checking accounts, certificates of deposit (CDs), and investment services through Ally Invest.
Source: Ally Financial Q2 2024 10-Q
In Q2 2024, Ally saw a slight bump in financing and interest revenue from $3.45 billion to $3.54 billion, though net income went down to 86 cents per share from 99 cents in the same quarter last year.
However, the sharp price downturn in early September 2024 was primarily due to CFO Russ Hutchinson stating that delinquencies and net charge-offs in the company’s auto loan portfolio were higher in July and August, prompting worries for its short- and medium-term performance. For reference, Ally has significant exposure to the auto loans market. That’s why the stock has the most divided analyst score in this list, averaging 3.58 based on 19 analysts and a relatively low 39.49 RSI.
Meanwhile, the company pays a 30-cent quarterly dividend, totaling $1.20 annually and reflecting a 3.51% yield based on current prices.
Civitas Resources (CIVI)
14-day RSI: 32.12
I’m never surprised that Civitas Resources appears in lists with “high yields” in the title. As a refresher, Civitas Resources is an oil and gas exploration and production company that focuses on sustainable energy development. The company operates primarily in the Denver-Julesburg Basin and has a strong ESG focus.
The company has been paying dividends since 2021 and has been very generous to its shareholders. Its current annual rate works out to $6.00 per share, reflecting an 11.24% yield at its last trading price.
Source: Civitas Resources Q2 2024 10-Q
Meanwhile, Civitas reported a significant boost in year-on-year quarterly revenue, leading to an excellent bottom line at $2.17 per share compared to last year’s $1.72. Its ratings are green across the board, with 13 analysts giving it a strong buy rating and one a moderate buy, leading to an impressive 4.93 average score.
Given its current performance, dividend yield, analyst rating, and low price, income investors might have difficulty finding a better buying opportunity.
Veren Inc (VRN)
14-day RSI: 37.90
Previously named Crescent Point, Veren Inc. is an oil company focused on exploring, developing, and producing oil and gas properties. The company operates across several Canadian provinces, including Saskatchewan and Alberta.
Source: Veren Q2 2024 Report
Veren’s latest quarterly numbers look promising. Revenue increased from $887.70 million to $1.11 billion, while net income increased from $212.30 million to $261 million, meeting analyst estimates.
The company currently pays 11.5 Canadian cents per quarter per share in dividends—roughly 8.6 cents USD, which reflects a 5.29% yield based on current trading prices. It also has a strong buy rating based on 11 analyst scores.
Conclusion
Buying undervalued dividend stocks offers the opportunity to profit from dividends and capital appreciation, like having your cake and eating it, too. However, due diligence is still a massive requirement when analyzing oversold stocks, as there might be a good reason why prices are so low. So, keep your eye on the markets and utilize all tools at your disposal to make sure you walk away with profits.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
