5 Undervalued Dividend Stocks to Scoop Up in October

The U.S. Treasury yields have been rising since the Fed signaled to start bond tapering in the near term and raised inflation rate projections for this year. This has caused significant declines in benchmark indexes this week. On Thursday, the S&P 500 posted its worst monthly percentage decline since the pandemic started.

As concerns related to the continued spread of Delta coronavirus variant, inflation, and the Fed’s taper talks linger, a defensive investment strategy could be appropriate now.

Dividend-paying stocks Gilead Sciences, Inc. (GILD), BASF SE (BASFY), Dow Inc. (DOW), KT Corporation (KT), and Hillenbrand, Inc. (HI), which are currently trading at discounted valuations, could be ideal bets now to dodge the market volatility and secure a steady income stream.

Gilead Sciences, Inc. (GILD)

GILD is a research-based biopharmaceutical company that discovers, develops, and commercializes medicines in areas of unmet medical need. The company’s primary focus areas include treatments for HIV/AIDS, liver diseases, cancer, inflammatory and respiratory diseases, and cardiovascular conditions.

The stock pays a $2.84 per share dividend annually, which translates to a 4% yield. The company’s dividend has grown at a 3.6% rate over the past four years.

In an announcement dated September 27, 2021, Health Canada has approved GILD’s Trodelvy to treat adult patients with metastatic triple-negative breast cancer (TNBC). This marks the fifth approval under Project Orbis, a global collaborative review program initiated by the U.S. Food and Drug Administration (FDA) Oncology Center of Excellence (OCE) with international regulatory authorities for high-impact oncology products. Being the first and only targeted treatment to show benefit in overall survival in 2L metastatic TNBC versus chemotherapy, this approval will help Trodelvy gain expanding market reach in the upcoming months.

For its fiscal second quarter ended June 30, 2021, GILD’s total revenues came in at $6.22 billion, representing a 20.9% year-over-year rise. The company’s non-GAAP operating income came in at $3.18 billion, indicating a 59.2% year-over-year improvement. GILD’s non-GAAP net income came in at $2.35 billion, up 68.1% from the prior-year period. Its non-GAAP EPS increased 68.5% year-over-year to $1.87. As of June 30, 2021, the company had $4.89 billion in cash and cash equivalents.

Analysts expect GILD’s EPS to improve marginally in the current year to $7.13. The consensus revenue estimate of $25 billion for the current year represents a 1.3% rise year-over-year. It surpassed the consensus EPS estimates in three of the trailing four quarters. Analysts expect the stock’s EPS to grow at a 1.4% rate per annum over the next five years.

The stock has gained 14.2% over the past year to close yesterday’s trading session at $69.85. In terms of forward EV/Sales, GILD is currently trading at 4.41x, 34.8% lower than the 6.76x industry average. In terms of forward Price/Sales, GILD is currently trading at 3.56x, 53.6% lower than the industry average of 7.67x.

GILD’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Value, and a B grade for Quality. Click here to see the additional ratings for GILD’s Growth, Sentiment, Momentum, and Stability.

Of the 503 stocks in the Biotech industry, GILD is ranked #4.  

BASF SE (BASFY)

BASFY is a Germany-based company that offers a variety of chemical products chemical, automotive, construction, agriculture, oil, plastics, electrical, electronics, furniture, and paper industries worldwide. It operates through six segments: Chemicals; Materials; Industrial Solutions; Surface Technologies; Nutrition & Care; and Agricultural Solutions.

The stock pays a $1.92 per share dividend annually, which translates to a 10.10% yield. The company’s dividend has grown at a 6.5% rate over the past four years.

On September 16, 2021, BASFY and Contemporary Amperex Technology Co., Limited (CATL), a Chinese battery manufacturer and technology company, announced a strategic partnership on battery materials solutions, including cathode active materials (CAM) and battery recycling. The collaboration aims at developing a sustainable battery value chain with BASFY’s expertise in support of CATL’s localization in Europe to strengthen its global market position and achieve global carbon neutrality goals.

BASFY’s sales revenue increased 55.8% year-over-year to €19.75 billion ($23.30 billion) in its fiscal second quarter, ended June 30, 2021. The company’s gross profit came in at €5.08 billion ($5.99 billion), up 62.3% from the prior-year period. Its income from operations came in at €2.32 billion ($2.73 billion) for the quarter, representing a 3825.4% rise from the prior-year period. While its adjusted net income increased 727.1% year-over-year to €1.86 billion ($2.20 billion), its adjusted EPS increased 712% to €2.03 ($2.40). As of June 30, 2021, BASFY had €2.87 billion ($3.38 billion) in cash and cash equivalents.

BASFY’s EPS is estimated to rise 68.3% year-over-year to $1.65 in the current year. It surpassed Street revenue estimates in each of the trailing four quarters. Analysts expect its revenue to be $86.76 billion for the current year, representing a 21.5% year-over-year improvement.

Over the past year, the stock has gained 23.5% and ended yesterday’s trading session at $19.04. BASFY’s 1.04x forward EV/Sales is 37.2% lower than the 1.65x industry average. In terms of forward Price/Sales, BASFY is currently trading at 0.81x, 41.8% lower than the industry average of 1.39x.

BASFY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Value and a B grade for Growth, Stability, and Quality. Click here to see the additional ratings for BASFY’s (Sentiment and Momentum).

BASFY is ranked #5 of 93 stocks in the B-rated Chemicals industry. 

Dow Inc. (DOW)

DOW offers a range of science-based products and solutions, various materials science solutions for consumer care, infrastructure, and packaging markets worldwide. The company operates through Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials and Coatings segments. It also engages in property and casualty insurance, as well as reinsurance business.

The stock pays a $2.80 per share dividend annually, which translates to a 4.86% yield. The company’s dividend has grown at a 4.5% rate over the past four years.

On September 22, 2021, DOW’s Dow Polyurethanes business division and companies like Orrion Chemicals Orgaform, Eco-mobilier, H&S Anlagentechnik, and The Vita Group inaugurated a pioneering mattress recycling plant as part of the RENUVA program. This RENUVA program will dismantle and recycle old mattresses made of polyurethane foam to create new polyol. With this RENUVA polyol that can be used in various applications, the companies are hoping to deliver greater sustainability offerings for the bedding industry.

For its fiscal second quarter ended June 30, 2021, DOW’s net sales increased 66.4% year-over-year to $13.89 billion. The company’s non-GAAP pretax income came in at $2.65 billion, compared to a $137 million loss in the year-ago period. DOW’s non-GAAP net income came in at $2.06 billion versus a $189 million loss in the prior-year period. Its non-GAAP EPS came in at $2.72, compared to a $0.26 loss in the year-ago period. As of June 30, 2021, the company had $3.49 billion in cash and cash equivalents.

Analysts expect the stock’s EPS to improve 413.3% year-over-year to $8.52 in the current year. The consensus revenue estimate of $52.87 billion for the current year indicates a 37.2% rise from the prior-year period. DOW surpassed the consensus EPS estimates in each of the trailing four quarters.

DOW has gained 22.3% over the past year to end yesterday’s trading session at $57.56. In terms of forward EV/Sales, DOW’s 1.12x is 31.9% lower than the 1.65x industry average. In terms of forward Price/Sales, DOW is currently trading at 0.83x, 40% lower than the industry average of 1.39x.

DOW’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. 

The stock has an A grade for Value, and a B grade for Growth. Click here to see the additional ratings for DOW’s Quality, Momentum, Stability, and Sentiment.

DOW is ranked #7 of 93 stocks in the Chemicals industry.  

KT Corporation (KT)

Based in South Korea, KT operates as an integrated telecom and digital platform service provider worldwide. The company offers principal services that include mobile, Broadband, IPTV, B2B communications, and fixed-line telephony. Through its subsidiaries, KT operates media content production, financial, real estate development, and commerce.

The stock pays a $0.61 per share dividend annually, which translates to a 4.45% yield. The company’s dividend has grown at a 4% rate over the past four years.

On September 8, 2021, KT signed a Stock Purchase Agreement (SPA) with Malaysia-based Kuok Group to acquire Singapore-based Epsilon Global Communications Pte, Ltd. for $145 million. By acquiring Epsilon, KT will continue to accelerate the transformation into DIGICO, a digital platform company, by combining the infrastructure and advanced services of global data business with AI services (GiGA Genie) and robots into the digital transformation (DX) business.

KT’s operating revenues increased 2.6% year-over-year to KRW6.03 trillion ($5.08 billion) for its fiscal second quarter ended June 30, 2021. The company’s operating income came in at KRW475.80 billion ($40 million), representing a 38.5% year-over-year improvement. Its net income came in at KRW370.80 million ($31 million) for the quarter, versus a $9.20 million loss in the prior-year period. The company had KRW3.10 trillion ($2.61 billion) in cash and cash equivalents as of June 30, 2021.

The consensus EPS estimate of $1.55 for the current year represents a 32.3% year-over-year improvement. The stock has gained 41.7% over the past year to close yesterday’s trading session at $13.62. KT’s 0.74x forward EV/Sales is 70.6% lower than the 2.50x industry average. In terms of forward Price/Sales, KT is currently trading at 0.40x, 76.4% lower than the industry average of 1.72x.

It’s no surprise that KT has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Value and Stability. Click here to see the additional ratings for KT's Growth, Sentiment, Momentum, and Quality.

The stock is ranked #5 of 48 stocks in the A-rated Telecom - Foreign industry.

Hillenbrand, Inc. (HI)

HI operates as a diversified industrial company, manufactures and sells premium business-to-business products and services worldwide. The company operates through three segments ─ Advanced Process Solutions; Molding Technology Solutions; and Batesville. It designs equipment and systems used in processing applications and offers compounding and extruding equipment, bulk materials handling systems, and related engineering services.

The stock pays a $0.86 per share dividend annually, which translates to a 2% yield. The company’s dividend has grown at a 2.3% rate over the past five years.

For its fiscal third quarter ended June 30, 2021, HI’s net revenues increased 14.4% year-over-year to $695.10 million. The company’s gross profit came in at $225.90 million, indicating a 9% year-over-year improvement. Its income before income taxes came in at $65.90 million, representing a 23.6% rise from the prior-year period. While its adjusted net income increased 5.9% year-over-year to $64.60 million, its adjusted EPS increased 4.9% to $0.85. As of June 30, 2021, the company had $869 million in cash and cash equivalents.

The consensus EPS estimate of $3.69 for the current year represents a 43% year-over-year improvement. HI’s revenue is estimated to rise 12.9% year-over-year to $2.84 billion in the current year. It surpassed the Street EPS estimates in each of the trailing four quarters, which is impressive. Its EPS is expected to grow at a 12.5% rate per annum over the next five years.

Over the past year, the stock has gained 50.4% and closed yesterday’s trading session at $42.65. HI’s 1.43x forward EV/Sales is 25.3% lower than the 1.91x industry average. In terms of forward Price/Sales, HI is currently trading at 1.10x, 27.2% lower than the industry average of 1.51x.

HI’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. 

The stock has an A grade for Value, and a B grade for Sentiment and Quality. Click here to see the additional ratings for HI’s Growth, Momentum, and Stability.

Of the 44 stocks in the A-rated Industrial - Manufacturing industry, HI is ranked #1.

GILD shares fell $0.06 (-0.09%) in after-hours trading Friday. Year-to-date, GILD has gained 21.47%, versus a 17.28% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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