In this article, we will take a look at the 10 Oversold Dividend Growth Stocks to Buy.
As the S&P 500 pushes toward record highs, investor concerns are rising alongside it. According to Bloomberg, bullish investors point to strong earnings growth driven by artificial intelligence, resilient corporate profits, and the potential for productivity gains. More cautious investors argue that the rally has been fueled by only a small group of mega-cap technology stocks and that valuations among leading AI-related companies have become stretched. There is also uncertainty surrounding the US-Iran conflict and questions about how persistent inflation could affect consumers whose finances are already showing signs of strain.
Even so, the broader market has recovered, and that is what many investors are focused on. Just two months ago, the S&P 500 was trading in negative territory. Back in March, Business Insider reported that Adam Kobeissi, founder of The Kobeissi Letter, believed the market was setting up for a rebound. In a note, he pointed out that the S&P 500 was trading at its lowest level in 232 days. He also noted that the index’s daily Relative Strength Index, which measures whether an asset is overbought or oversold, had fallen to around 29. When that indicator drops below 30, it is often viewed as a sign that an asset has become oversold.
Jay Woods, chief market strategist at Freedom Capital Markets, also highlighted historical market trends. In a note to clients, he said that in 20 of the previous 28 instances when the S&P 500 fell below its 200-day moving average, the index moved back above that level within 10 trading days.”In all cases except the bear market of 2022, things were short-lived and provided great entry points for traders over both the long and short-term,” Woods wrote.
For now, the broader market appears to have moved past the worst of its recent weakness. Even so, some oversold stocks may still offer opportunities before they fully recover.
Given this, we will take a look at some oversold stocks that pay dividends.
Photo by Scott Graham on Unsplash
Our Methodology:
For this list, we used a Finviz stock screener and looked for dividend stocks with a 14-day Relative Strength Index (RSI) below 30 as of June 4. An RSI below 30 suggests that the stock is oversold. From that group, we picked stocks with a 5-year average dividend growth rate of over 5%. The stocks are ranked according to their RSI.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
10. Conagra Brands, Inc. (NYSE:CAG)
Relative Strength Index: 29.08
5-Year Dividend Growth Rate: 6.18%
On June 3, Bernstein downgraded Conagra Brands, Inc. (NYSE:CAG) to Underperform from Market Perform. It also reduced its price target on the stock to $12 from $16. The firm said the company appears to be moving toward a dividend cut, noting that its payout ratio has climbed to nearly 90%. In a research note, the analyst suggested that incoming CEO John Brase may seek additional investment spending to help revive sales growth. Bernstein pointed to ongoing commodity inflation and Conagra’s limited ability to raise prices as key reasons for the downgrade.
A day earlier, on June 2, UBS analyst Peter Grom lowered his price recommendation on CAG to $13 from $16. He reiterated a Neutral rating on the stock. In a research note, the analyst said the firm had revised its expectations for food companies to reflect current demand trends and inflationary pressures.
Conagra Brands, Inc. (NYSE:CAG) is a branded food company with operations across four segments: Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice. Its Grocery & Snacks division includes branded shelf-stable food products that are sold through a variety of retail channels across the United States.
9. Westlake Corporation (NYSE:WLK)
Relative Strength Index: 29.05
5-Year Dividend Growth Rate: 14.44%
On May 27, Citi downgraded Westlake Corporation (NYSE:WLK) to Neutral from Buy. It lowered the stock’s price target to $95 from $125. The firm cited a slower-than-expected recovery in the housing market and what it described as “less favorable” polyvinyl chloride fundamentals. Citi noted that prices in Asia have started to normalize amid weak construction activity and ample supply. As a result, the firm sees few catalysts that could sustain the current momentum in polyvinyl chloride pricing. Given those conditions, Citi expects limited supply-driven upside for Westlake’s pricing going forward.
Earlier in the month, on May 18, JPMorgan analyst Jeffrey Zekauskas upgraded Westlake to Neutral from Underweight while maintaining a $90 price target. In a research note, the analyst said the shares were trading close to fair value. JPMorgan expects Westlake to generate free cash flow equivalent to about 3% of its share price in 2026 and 8% in 2027. The firm also pointed out that polyethylene prices had increased by 40 cents per pound over the previous two months, outpacing export prices. Based on that trend, JPMorgan said that “we would be surprised to find the May price increase successful.”
Westlake Corporation (NYSE:WLK) manufactures and supplies a wide range of materials and products used in everyday applications. The company operates across Asia, Europe, and North America, serving markets that include housing and construction, packaging, healthcare, automotive, and consumer products.
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