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3 Overlooked Stocks With Strong Value and Dividend Potential

BLOOMINGTON, MN, USA - JUNE 13, 2022:CVS Pharmacy, HealthHUB and Minute Clinic sign and trademark logo.

Key Points

  • Three forgotten-about, sluggishly performing defensive stocks that could offer value and income potential over the long term.
  • Despite recent declines, CVS Health stands out with a P/E of 10.11 and a dividend yield of 4.62%.
  • Dollar General, a dividend aristocrat, trades at levels not seen since 2017, with a P/E of 12.11 and a yield of 2.84%.
  • 5 stocks we like better than Albertsons Companies.

Certain stocks stand out as attractively priced and well-positioned for potential appreciation for value investors focused on long-term growth with a defensive approach. While not isolated from risks and challenges, the three companies discussed below trade at favorable valuations based on P/E ratios and earnings growth and offer the added benefit of dividend income, making them appealing to those seeking steady returns and compounding growth. 

So, let's explore three defensive stocks that present potential value and income opportunities based on their P/E and dividend yield, making them ideal for cautious investors with a long-term perspective. 

CVS Health Stock Hits Value Territory

CVS Health NYSE: CVS, a household brand and healthcare giant in the U.S. with a market capitalization of $72 billion, is trading at levels not seen since the early days of the pandemic in 2020. Following a steep decline in recent months, the company's stock is now firmly in value territory with a P/E multiple of 10.11.

CVS Health Dividend Payments

Dividend Yield
3.99%
Annual Dividend
$2.66
Annualized 3-Year Dividend Growth
6.56%
Dividend Payout Ratio
46.75%
Next Dividend Payment
Nov. 1
CVS Dividend History

This low valuation, paired with an impressive 4.62% dividend yield, makes CVS a compelling option for value investors seeking both income and growth potential.

Despite being down nearly 28% year-to-date, partly due to rising medical expenses impacting its health insurance business, CVS has delivered solid financial results. In its most recent earnings report on August 7th, 2024, the company posted earnings per share of $1.83, beating consensus estimates by $0.10. While revenue of $91.23 billion slightly missed expectations, it still reflected a 2.6% year-over-year increase.

Analysts remain optimistic about CVS, maintaining a moderate buy rating with a price target that suggests over 25% potential upside. The company's above-average dividend yield of 4.62%, far exceeding the S&P 500's average, adds to its appeal for long-term, income-focused investors.

Analysts Predict 37% Upside for Dollar General Stock

Dollar General NYSE: DG, a leading discount retailer serving millions of budget-conscious shoppers across the U.S., has faced significant challenges recently, with the stock plummeting after missing on both earnings and revenue. While this may seem like a failure in execution, it highlights broader economic concerns.

Dollar General Dividend Payments

Dividend Yield
2.86%
Annual Dividend
$2.36
Annualized 3-Year Dividend Growth
8.13%
Dividend Payout Ratio
36.65%
Next Dividend Payment
Oct. 22
DG Dividend History

As economic indicators, discount retailers like Dollar General reflect financial strain on lower-income consumers. Persistent inflation, stagnant wages, and the end of pandemic-era assistance have eroded purchasing power, driving declining sales and profitability at DG and signaling broader issues in the U.S. economy.

However, as the sophisticated and long-term investor will know, markets and economies move in cycles, and downturns present potential opportunities for value investors. Dollar General, trading at levels not seen since 2017 with a P/E of 12.11, could itself be a bargain. Analysts certainly think so, with a consensus price target of $113.95, forecasting a nearly 37% upside. Paired with a dividend yield of 2.84% and the long-term resilience of the U.S. economy, DG presents a case for further research as a potential value and income play for patient investors.

Albertsons Offers a 2.67% Dividend Yield and Growth Potential

Albertsons Companies NYSE: ACI is a well-known household name in the U.S., founded in 1860, and has earned its status as a dividend aristocrat. Operating a vast network of food and drug stores nationwide, the company provides a wide range of grocery products, general merchandise, health and beauty care items, pharmacy services, fuel, and more.

Albertsons Companies Dividend Payments

Dividend Yield
2.61%
Annual Dividend
$0.48
Annualized 3-Year Dividend Growth
68.69%
Dividend Payout Ratio
25.00%
Recent Dividend Payment
Aug. 9
ACI Dividend History

Recently, ACI's stock pulled back into a major support zone near $18, testing its 2022 lows before bouncing. The selloff from $21 to $18 in recent weeks could offer a buying opportunity for value-focused investors. With a P/E ratio of 8.05, ACI is firmly in value territory.

Despite sluggish stock growth in recent years, analysts remain bullish on its prospects, forecasting up to 36% upside with a moderate buy rating. Additionally, the stock offers a 2.67% dividend yield and positive earnings projections for the full year, making it an appealing choice for those seeking both growth and income.

However, investors should closely monitor news surrounding the FTC's trial to block Albertsons' sale to competitor Kroger NYSE: KR. Recently, Kroger extended the expiration date of its offers to exchange Albertsons' outstanding notes, reflecting the ongoing uncertainty regarding the deal.

Should you invest $1,000 in Albertsons Companies right now?

Before you consider Albertsons Companies, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Albertsons Companies wasn't on the list.

While Albertsons Companies currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Ryan Hasson
About The Author

Ryan Hasson

Contributing Author

Technical Analysis, Momentum Trading, Risk Management

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Dollar General (DG)
4.9436 of 5 stars
$82.49+0.1%2.86%12.81Hold$109.15
CVS Health (CVS)
4.9832 of 5 stars
$66.63-0.3%3.99%11.86Moderate Buy$75.26
Albertsons Companies (ACI)
4.261 of 5 stars
$18.37+0.4%2.61%9.57Moderate Buy$23.54
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