Home Most Popular Unlocking Hidden Potential: A Dive into 2 Undervalued Dividend Stocks

Unlocking Hidden Potential: A Dive into 2 Undervalued Dividend Stocks

0
Unlocking Hidden Potential: A Dive into 2 Undervalued Dividend Stocks

The S&P 500 has been on a steady climb this year, showcasing the strength of the bull market. While growth stocks may be the obvious play during more bullish times, a well-rounded investment approach should look beyond short-term gains.

In the realm of investing, longevity often reaps the greatest rewards. To secure a successful portfolio that stands the test of time, diversification across industries is key — with a sprinkle of dividend stocks adding a layer of stability and passive income.

1. Coca-Cola: A Timeless Classic

Coca-Cola (NYSE: KO) stands tall as a venerable dividend stock, consistently rewarding investors with both passive income and growth over the years. As a member of the exclusive Dividend Kings club, Coca-Cola has a reputation for increasing dividends annually for over half a century.

Currently offering a dividend yield of 3.17%, Coca-Cola pays shareholders $1.94 per share, significantly surpassing the S&P 500’s dividend yield. With over $9.7 billion in free cash flow, the company is well-poised to continue its tradition of elevating dividend payouts annually — presenting investors with a reliable income source.

Moreover, investing in Coca-Cola grants access to a company with robust earnings prospects, driven by its formidable brand power that bestows a competitive edge or “moat.” As the largest non-alcoholic beverage producer globally, Coca-Cola’s portfolio includes iconic brands like Dasani water and Minute Maid juices.

This brand strength has enabled Coca-Cola to weather economic storms, such as the past year, while continuing to flourish. Notably, the company witnessed growth in global unit case volume, net revenue, free cash flow, and earnings per share. Additionally, Coca-Cola has been capturing market share in the non-alcoholic ready-to-drink beverages sector.

Trading at a favorable valuation relative to forward earnings estimates and with rising revenues, Coca-Cola shares currently present an attractive entry point for investors.

KO Revenue (Annual) Chart

KO Revenue (Annual) data by YCharts.

2. Meta: Where Growth Meets Innovation

Meta Platforms (NASDAQ: META), the social media titan formerly known as Facebook, offers investors a mix of escalating earnings, exposure to the burgeoning artificial intelligence (AI) realm, and now, dividend payments. Meta recently introduced its inaugural dividend, with a $2 per share payout at a 0.40% yield.

Although not the most lucrative dividend offering, Meta’s trajectory of growth coupled with a stream of passive income makes it an intriguing investment prospect. In its recent financial report, Meta highlighted its strong financial stance, affirming its commitment to investing in the business and returning capital to shareholders — hinting at future dividend distributions.

The company’s strategic pivot towards AI underscores its bold investment in this cutting-edge technology. By integrating AI across its suite of products, Meta aims to enhance user engagement, which is pivotal for advertisers making marketing decisions on platforms like Facebook and Instagram, translating directly into revenue growth for Meta.

Furthermore, Meta’s dedication to AI innovation positions it as a potential leader in the industry. Notably, the development of Llama large language models (LLMs) signifies additional revenue opportunities on the horizon.

Surprisingly, despite its growth potential and dividend payouts, Meta’s stock trades at a modest 24x times forward earnings estimates — an enticing proposition for investors seeking exposure to AI technology alongside steady income.

Should you invest $1,000 in Coca-Cola right now?

Before you buy stock in Coca-Cola, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Coca-Cola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of March 11, 2024

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.