The stock market has entered a phase that no one likes. Bear markets naturally have investors wondering when things will turn around. In this bear market, investing in undervalued dividend stocks to buy is an obvious and smart investment choice.
The safety margin that undervalued stocks offer is like an antidote to the risk-off investor sentiment. The theory suggests that at some point in time, undervalued stocks should converge to their intrinsic values and close the gap between observed and real stock prices.
With inflation now at approximately 8%, getting paid a dividend yield of more than 8% is enough to generate passive and real income. It is time to play defense and mitigate losses in stocks, which is exactly what these three dividend stocks are about.
These undervalued dividend stocks offer solid financials, a forward dividend yield of more than 8% to beat inflation and a strong chance that Wall Street notices them soon. Investing early in these stocks has risks, but the reward could be big.
| OMF | OneMain Holdings | $2.78 |
| SIRE | Sisecam Resources | $17.75 |
| BAK | Braskem | $14.52 |
OneMain Holdings
OneMain Holdings (NYSE:OMF) is a financial services company providing loans helping its customers to plan and build a better financial future. It offers loans secured by collateral, including cars.
It’s a great time to consider adding shares of OneMain Holdings to your portfolio. The shares have losses of nearly 26% in 2022 and trade at a price-to-earnings (P/E) ratio of 4.1. The company began paying dividends in 2019, and its two most recent dividends represent a 10.4% yield.
The dividend yield history is not stable, but it is consistent. The forward payout ratio of 42% is very safe. The company occasionally offers special dividends such as the dividend of $3.95 back in February 2021.
The business model is strong. Sales growth has been stable over the past two years, but profitability has gained a lot of traction. In 2021, OneMain reported a net income growth of 80% to $1.31 billion.
The trailing 12-months price-to-earnings growth of 0.36 signals an undervalued stock with a lot of upside potential. The one year analyst target is $69.79, a likely gain of 87%.
Sisecam Resources (SIRE)
Sisecam Resources (NYSE:SIRE) is a global leading company in soda ash production. The company is headquartered in Atlanta, Georgia, and has a production facility located in Green River, Wyoming. Its production of soda ash started in 1962.
SIRE stock offers a forward dividend yield of 11.9% and trades at a P/E ratio of 9.6. The stock is up 9% in 2022.
Q1 2022 financial results were strong showing a year-over-year increase of 27.9% for net sales to $163.4 million, and a 467.9% year-over-year growth for net income to $31.8 million.
The CEO of the company commented, “I am excited to report a good start to 2022, highlighted by promising net income and adjusted EBITDA for the first quarter.”
The firm is not only consistently profitable but also generates positive free cash flows. That’s a combination that is ideal for supporting a higher stock price.
Braskem (BAK)
Braskem (NYSE:BAK) was founded in 2002 by the merger of six companies and is now the largest producer of thermoplastic resins and polypropylene in the U.S.
Braskem stock has lost 32% in 2022 and trades at a P/E ratio of 1.9. It didn’t offer a dividend in 2020 but has an otherwise healthy history of dividends.
Business is good for Braskem; sales growth grew 80.42% in 2021 to $105.63 billion, and net income growth was 308.99% to $13.98 billion.
The 1-year target estimate of $23.60 signals an upside potential of 42%. In its Q1 2022 results, Braskem stated that among its key goals for 2022 are to “capture value through initiatives related to Transform for Value program,” with a specific target of recurring gains for $302 million, and to “return value to shareholders via dividend distributions.” The company generated a free cash flow growth of 221.24% in 2021 to $11.37 billion, which will help it pay dividends.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.