The 3 Most Undervalued Dividend Stocks to Buy in February 2024

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Undervalued dividend stocks can generate returns while presenting cash flow and a margin of safety. As prices remain deflated, dividend reinvestments will allow you to build your positions and end up with a good cost basis.

However, not every dividend stock is a winner. Some corporations have high yields but not much beyond that. Other dividend stocks can deliver exceptional long-term gains and payouts. Investors looking for undervalued dividend stocks may want to consider these picks.

Visa (V)

several Visa branded credit cards

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Visa (NYSE:V) is the leader in the credit and debit card industry. The firm’s market cap exceeds $500 billion, and it is realistic to see this stock reach the $1 trillion milestone within a few years.

Visa makes most of its money from credit and debit card transactions. The more times people buy goods and services, the more money Visa will make. That formula proved to be effective yet again in the first quarter of fiscal 2024.

During that quarter, net revenue increased by 9% year-over-year (YoY) while net income grew by 17% YoY. GAAP earnings per share increased by 20% YoY. This figure was higher than the net income growth rate since Visa regularly invests in stock buybacks. 

The company also tends to raise its dividend by at least 10% each year. Visa closed out 2023 by hiking its quarterly dividend from $0.45 per share to $0.52 per share.

Microsoft (MSFT)

Microsoft logo close up. Microsoft (MSFT) Flagship Store Fifth Avenue, Manhattan, NYC.

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Microsoft (NASDAQ:MSFT) continues to report strong financials while returning capital to shareholders. The firm returned $8.4 billion to shareholders through stock repurchases and dividends in the second quarter of fiscal 2024. 

Year-over-year revenue and net income growth for the quarter came in at 18% and 33% respectively.

Microsoft isn’t known as a dividend stock due to its low 0.74% yield. However, the firm raises its dividend each year at an impressive rate. The company closed out 2023 by increasing its quarterly dividend per share from $0.68 to $0.75. That marks a 10.3% YoY increase. Microsoft almost doubled its quarterly dividend payout from 2017 to 2023. The quarterly payout went from $0.39 per share to $0.75 per share.

Microsoft can generate meaningful cash flow for long-term investors, but long-term stock gains are the big driver for investors. It’s hard to ignore a stock that has almost quadrupled over the past five years and continues to grow across multiple verticals. Shares currently trade at a P/E ratio below 40.

Walmart (WMT)

An image of a Canoo, Inc. (GOEV) Walmart electric delivery vehicle

Walmart (NYSE:WMT) is an iconic American brand that has demonstrated resilience in a wide range of economic cycles. No matter how bad things get, people will still need to buy goods and services. However, consumers will also look for more affordable goods, and that’s Walmart’s specialty.

The global retailer has some of the lowest prices available. This appeal helped the company generate 5.2% YoY revenue growth in the third quarter of fiscal 2024. International revenue growth came in at 10.8% YoY.

Walmart isn’t the type of stock to outperform the market, but it isn’t likely to collapse during economic challenges. For instance, shares only dropped by 2% in 2022. During that same year, many tech stocks lost more than 50% of their value. Walmart shares are up by 21% over the past year and have gained 77% over the past five years. The firm offers a 1.34% dividend yield and inches its payouts higher each year.

On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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