In this article, we are going to discuss the top 12 undervalued dividend stocks to buy now.
Morningstar Chief US Market Strategist David Sekera wrote, “Stocks are undervalued, but for a reason,” in his Q2 2026 stock market outlook. He said the ongoing war in Iran has added another layer of uncertainty to the market, while weaker macroeconomic conditions are also starting to appear. Sekera believes investors should use market volatility to their advantage. His view is that investors can take profits from overvalued stocks and move that money into stocks trading below their fair value.
A Forbes report said undervalued stocks can provide downside protection along with long-term growth potential. That mix becomes especially appealing when the market outlook depends on uncertain developments, including how long and severe the US-Iran conflict could become.
At the same time, the report noted that finding truly undervalued stocks is difficult. Many stocks trade cheaply for legitimate reasons, and only a small number are actually overlooked by the market.
Investors continue to debate growth versus value stocks, with many analysts strongly leaning toward one strategy or the other. Hartford Funds took a more balanced approach and argued that both styles have an important place in a portfolio. The report pointed out that growth and value stocks have historically moved in cycles. Growth stocks dominated during the dotcom boom in the 1990s and continued to perform well for years afterward. Value stocks, on the other hand, performed better between 2001 and 2008, a period when investors paid closer attention to dividends and stock valuations. Hartford Funds said this back-and-forth pattern shows the benefit of owning both growth and value investments rather than relying too heavily on one category.
Fidelity Investments also explained that value stocks usually trade at prices that look low compared to a company’s earnings and profitability. Many of these businesses are large, established companies with stable financial positions. The firm added that value stocks are often more likely to pay dividends because mature companies may not need to reinvest as much excess cash into expansion as fast-growing companies do.
Given this, we will take a look at some of the most undervalued dividend stocks.
Photo by Viacheslav Bublyk on Unsplash
Our Methodology
To collect data for this article, we used several screeners to identify stocks with a forward P/E ratio of less than 15, as of May 17. We then further shortlisted stocks that boast an annual dividend yield of at least 3%. Finally, we limited our selection to companies that have recently reported noteworthy developments likely to impact investor sentiment. The following are the Most Undervalued Dividend Stocks to Buy Now.
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. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
12. Target Corporation (NYSE:TGT)
Forward P/E Ratio: 14.95
Dividend Yield as of May 17: 3.75%
Target Corporation (NYSE:TGT) operates as a general merchandise retailer with stores in all 50 states and the District of Columbia.
On May 15, JPMorgan raised its price target on Target Corporation (NYSE:TGT) from $120 to $129, but kept a ‘Neutral’ rating on the shares. The revised target, which reflects an upside of over 6% from the current share price, comes after the analyst firm updated its estimates in the retailing group as part of a Q1 earnings preview.
According to JPMorgan, the pressure from higher energy prices was outweighed by the tax stimulus in the quarter. However, the firm expects minimal revisions to guidance, since the key back-to-school and holiday season are still ahead in a “high uncertainty” environment.
Target Corporation (NYSE:TGT) expects an adjusted EPS in the range of $7.50 to $8.50 for FY 2026, indicating a YoY growth of 5% to 6% at the midpoint. Moreover, the company is targeting to open more than 30 new stores this year, and over 300 new stores by 2035.
Target Corporation (NYSE:TGT) was recently included in our list of the 14 Best Dividend Stocks to Buy for Steady Growth.
11. Exelon Corporation (NASDAQ:EXC)
Forward P/E Ratio: 14.91
Dividend Yield as of May 17: 3.87%
Exelon Corporation (NASDAQ:EXC) is one of the country’s largest utility companies, serving more than 10 million customers through six fully regulated transmission and distribution utilities.
On May 15, TD Cowen trimmed its price target on Exelon Corporation (NASDAQ:EXC) from $51 to $49, but kept a ‘Hold’ rating on the shares. The lowered target, which still reflects an upside of 13% from the current price level, comes after the analyst firm updated its models in the utilities group following the Q1 earnings season.
TD Cowen increasingly expects utilities to deliver incremental growth on a cost-neutral basis. The firm expects a faster pace of capital plan increases, but cautions against the issue of over-promising.
The target cut comes despite Exelon Corporation (NASDAQ:EXC) reporting strong results for its Q1 2026 on May 6, with the company exceeding estimates in both earnings and revenue. The company reaffirmed its operating earnings guidance of $2.81 to $2.91 per share for FY 2026. Moreover, the utility is targeting an annualized earnings growth of 5% to 7% through 2029, with the expectation of being near the top end of that range.
Exelon Corporation (NASDAQ:EXC) is forecasting $41.7 billion of capital expenditures over the next four years, resulting in expected rate base growth of 7.9%.
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