If you’re looking for that best blue-chip dividend stocks to buy, remember they command a valuation premium, but sometimes dividend stocks trade at a valuation gap. This provides a good entry opportunity for high total returns. This column focuses on dividend stocks to buy that can deliver returns of 100% in the next 12 months.

Of course, macroeconomic conditions remain challenging and 100% for blue-chip stocks in one year sounds optimistic.

However, I believe that markets have a catalyst of policy stance reversal by the fed in the second half of 2023. If this holds true, broad markets will rally and undervalued stocks are likely to surge.

It’s therefore a good time to create a portfolio of undervalued dividend stocks to buy along with quality growth stocks. Let’s discuss three dividend stocks that can surge in the coming quarters.

Pfizer (PFE)

Investors have punished Pfizer (NYSE:PFE) stock in the last 12 months and the stock has declined by 23%.

However, I believe that traders massively undervalued the pharmaceutical stock at a forward price-earnings ratio of 11.4. PFE stock offers an attractive dividend yield of 4.22%.

There are multiple reasons to be bullish on Pfizer. The market for RSV vaccines should swell to $10 billion by 2030. Pfizer is among the best positioned to benefit from the big addressable market.

Further, Pfizer has a deep pipeline of drug candidates. The company has been investing heavily in research and development. Potential blockbuster drugs can be cash flow machines for the company.

It’s also worth noting that Pfizer has been active on the inorganic growth front. The company expects $25 billion in risk-adjusted revenue from new business development by 2030. With these positives, PFE stock looks undervalued and poised for a sharp reversal rally.

Chevron Corporation (CVX)

Chevron Corporation (NYSE:CVX) is possibly the best oil and gas stock to buy. The stock currently offers a dividend yield of 3.58%. Even with some decline in oil price, the stock has remained resilient.

Besides company specific factors, there are two reasons to be bullish on Chevron. Product cut by OPEC and allies is targeted towards ensuring that oil remains around $80 levels.

Further, if there is a recession in the second half of 2023, expansionary policies are likely. A weak dollar will be positive for energy and commodity prices.

From a fundamental perspective, Chevron has an investment grade balance sheet. Low break-even assets ensure robust cash flows. Last year, Chevron reported operating cash flow of $47.5 billion.

Strong cash flows position the company for big capital investments. Further, dividend growth will sustain along with aggressive share repurchase. Given these positives, CVX stock looks attractive at a forward PE of 12.0. A sharp rally is imminent.

Newmont Corporation (NEM)

Newmont Corporation (NYSE:NEM) stock looks poised for a strong rally in the coming quarters from oversold levels.

Gold is currently trading near $2,000 an ounce and I believe that the precious metal is likely to surge in the second half of 2023. Potential reversal in monetary policy stance is the key reason to be bullish on gold.

Newmont Mining is the best pick from the gold mining sector. NEM stock currently trades at an attractive forward PE of 19.5 and offers a dividend yield of 3.38%.

Assuming that realized gold prices increase; Newmont is positioned for significant free cash flow upside. For every $100 increase in gold price, the company expects $400 million in incremental FCF.

I personally expect gold to trade at $2,200 to $2,300 an ounce on renewed expansionary policies. This would imply more than $1 billion in FCF.

Overall, Newmont is positioned to create sustained value through dividends and share repurchase. Considering the potential tailwind for gold price, a big rally seems to be on the cards.

On the date of publication, Faisal Humayun 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.