3 Iconic Brands Offering Both 5% Yields and 50% Upside at Current P/Es

Stocks to buy

The stocks of iconic brands are en masse. However, the informational asymmetry linked to the financial markets means that few are undervalued.

Considering the above, I embarked on a quest to find three undervalued stocks from iconic brands with high dividend yields. Stocks with low price-to-earnings ratios and high dividend yields often trigger value traps. As such, I ensured a robust screening methodology was applied.

Methodologically, my screening process emphasized fundamental attributes, valuation multiples, technical analysis, and event-driven aspects. Moreover, I ensured that each of my picks aligned with the prevailing market sentiment to ensure a holistic analysis.

With all that in mind, here are three best-in-class stocks from iconic brands to consider.

British American Tobacco (BTI)

Source: DutchMen / Shutterstock.com

British American Tobacco (NYSE:BTI) is a household name in the tobacco industry. However, its stock has shed more than 10% of its value in the past five years, primarily due to the company’s restructuring process. Moreover, British American Tobacco has faced significant Environmental, Social, and Governance headwinds in past years, concurrently devaluing its stock.

Despite having sustained a challenging period, I believe British American Tobacco’s stock is a buy. The company has pivoted into renewed growth opportunities such as non-combustible products. Moreover, British American Tobacco recently increased its stake in Canadian cannabis producer Organigram (NASDAQ:OGI) to 45%, signaling an intent to pivot into alternative consumer bases.

British American Tobacco’s operating profit margin of 48.44% suggests the firm has enough cash cows to help it pivot into new industries while retaining shareholder value. Moreover, BTI stock’s forward price-to-earnings ratio of 7.14x is exceptionally well-placed. In addition, BTI stock has a forward dividend yield of 9.61%, adding a floor to its stock price.

This seems like a solid high-dividend value stock. I’m bullish about BTI stock’s prospects!

Volkswagen AG (VWAGY)

Source: multitel / Shutterstock.com

As one of the world’s top automakers, Volkswagen AG (OTCMKTS:VWAGY) doesn’t need an introduction. However, that doesn’t mean the firm’s stock is a perpetual winner. VWAGY stock is a cyclical asset, so interim price swings are a regular feature. In fact, VWAGY stock has lost nearly 30% of its value in the past twelve months, substantiating my claim.

Many may disagree, but Volkswagen stock’s recent downturn likely presents a buying opportunity. I believe that a pending decline in global interest rates will trigger renewed demand for durable goods, including vehicles. Additionally, Volkswagen has exciting company-specific aspects. For instance, it plans to launch a low-cost electric vehicle by 2027, which is promising, given that Volkswagen’s value proposition is its vehicles’ value for money.

Lastly, Volkswagen’s capital markets-based prospects seem in order.

VWAGY has a forward price-to-earnings ratio of only 3.72x and a forward dividend yield of 8.19%, suggesting it is grossly undervalued. Moreover, it is trading below its 50-, 100-, and 200-day moving averages, indicating that a buy-the-dip opportunity has emerged.

Altria Group (MO)

Source: Kristi Blokhin / Shutterstock.com

Altria (NYSE:MO) is another Tobacco stock that owns most of its supply chain, even including medical products to cure tobacco-linked illnesses.

The firm is in a similar position to British American Tobacco, whereby it is restructuring to meet future consumers’ demands. In one of its latest moves, Altria acquired NJOY Holdings to enhance its foothold in the rechargeable cigarette market. I believe a lengthy period of acquisitions is en route, which could add value to Altria’s broad-based business model.

Furthermore, Altira has robust fundamental metrics, allowing it to acquire while sustaining shareholder value. For example, Altria has a net profit margin of 41.42%, conveying that it has achieved economies of scale. In addition, Altria has sound liquidity, communicated by its total cash per share ratio of 2.1x.

Altria’s forward price-to-earnings ratio of 8.97x might seem average. However, reinvigorated growth paired with its forward dividend yield of 8.61% speaks volumes.

I’m bullish here!

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, Steve Booyens did not hold (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.

Steve Booyens co-founded Pearl Gray Equity and Research in 2020 and has been responsible for cross-asset research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa. He holds an MSc in Investment Banking from Queen Mary – University of London. Furthermore, Steve obtained his CFA Charter on April 26, 2024, and is working toward his Ph.D. in Finance. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance, and Benzinga. Steve’s articles on InvestorPlace form an interesting juxtaposition between mainstream opinion and objective theory. Readers can expect coverage on frequently traded stocks, REITs, fixed-income funds, CEFs, and ETFs.

Articles You May Like

Get Your Money Out of These 3 Industrial Stocks by the End of July
3 Flying Car Stocks That Could Grow Your Wealth
Warren Buffett’s Berkshire trims Bank of America stake for the first time since 2019 after strong rally
3 Cybersecurity Stocks to Buy Now: Q3 Edition
3 Healthcare Stocks to Buy Now: Q3 Edition