Dear Investors,

Welcome to this edition of the Dividend Growth & Value Newsletter—your trusted source for identifying undervalued dividend stocks with strong growth potential while avoiding common dividend traps.

This month’s focus is on stocks yielding 3.5% or more, offering sustainable growth, and trading at attractive valuations. The following five picks stand out as solid dividend growers, all with manageable payout ratios, positive earnings growth, and stable financials.

 

Top 5 Undervalued Dividend Stocks for February 2025

 

1. UGI Corporation (UGI) – The Utility with a Growth Edge

 

• Industry: Utilities – Regulated Gas
• Dividend Yield: 5.4%
• Dividend Growth Streak: 37 consecutive years
• Payout Ratio: ~50% (Safe zone)
• P/E Ratio: 9.3 (Undervalued)
• Projected EPS Growth (Next 5 Years): +7% per year

Why It’s a Strong Pick:
UGI is an underrated dividend aristocrat operating in the regulated gas and propane sectors. While most utilities offer stability, UGI offers both stability and growth, thanks to its international expansion and diversification into renewables.

Potential Risks: UGI’s propane business is seasonal and depends on winter demand. However, its regulated utility division provides a stable cash flow buffer.

Opportunity: With a low P/E of 9.3, UGI is currently undervalued compared to its historical average (P/E ~15), making this a solid dividend growth opportunity.

 

 

 

2. Ford Motor Company (F) – A Cyclical Dividend Comeback Story

 

• Industry: Auto Manufacturing
• Dividend Yield: 5.6%
• Payout Ratio: ~60%
• P/E Ratio: 8.1
• Projected EPS Growth (Next 5 Years): +6.5% per year

Why It’s a Strong Pick:
Ford has rebuilt its dividend after slashing it during the pandemic, now offering a healthy 5.6% yield. The company is balancing traditional ICE vehicle sales with EV expansion, making it a well-positioned legacy automaker for the evolving market.

Potential Risks: EV margins remain thin, and economic downturns could hurt auto sales demand. However, Ford’s truck & fleet business provides a steady income stream, and its ICE division remains highly profitable.

Opportunity: Ford’s P/E of 8.1 is lower than the auto industry average (~12). As demand stabilizes, there is room for multiple expansion and continued dividend growth.

 

 

3. LyondellBasell Industries (LYB) – The High-Yield Chemical Giant

 

• Industry: Specialty Chemicals
• Dividend Yield: 6.5%
• Dividend Growth Streak: 13 years
• Payout Ratio: ~70% (Still reasonable for industry)
• P/E Ratio: 7.0 (Highly undervalued)
• Projected EPS Growth (Next 5 Years): +5.8% per year

Why It’s a Strong Pick:
LyondellBasell is one of the world’s largest plastics, chemicals, and refining companies, supplying materials to industries that will always need them—automotive, construction, packaging, and medical.

Potential Risks: Chemical companies are cyclical, and demand for materials can fluctuate during recessions. However, LYB has one of the most shareholder-friendly policies, consistently increasing dividends even through downturns.

Opportunity: With a 6.5% yield and a P/E of just 7, LYB is significantly undervalued compared to its peers (~11-13 P/E). Insiders recently bought shares, signaling management confidence.

 

 

4. Whirlpool Corporation (WHR) – A High-Yield Value Play

 

• Industry: Consumer Appliances
• Dividend Yield: 6.4%
• Dividend Growth Streak: 10+ years
• Payout Ratio: ~65%
• P/E Ratio: 9.2
• Projected EPS Growth (Next 5 Years): +6.2% per year

Why It’s a Strong Pick:
Whirlpool is a dominant global appliance manufacturer, with well-known brands like KitchenAid, Maytag, and Amana. Even during slow economic periods, appliances remain essential purchases.

Potential Risks: Appliance sales are cyclical, and higher interest rates could reduce home purchases, indirectly affecting demand. However, Whirlpool’s reliability as a dividend payer makes it a strong defensive stock.

Opportunity: WHR’s low P/E of 9.2 suggests deep value, especially considering its consistent dividend growth.

 

 

5. Chevron Corporation (CVX) – The Oil Giant with a Safe Dividend

 

• Industry: Oil & Gas Integrated
• Dividend Yield: 5.0%
• Dividend Growth Streak: 37+ years
• Payout Ratio: ~60%
• P/E Ratio: 10.1
• Projected EPS Growth (Next 5 Years): +5.5% per year

Why It’s a Strong Pick:
Chevron is a dividend aristocrat that has raised payouts through oil booms and crashes. Despite the push for renewables, oil demand remains strong, and Chevron’s diverse operations (refining, upstream/downstream) ensure stability.

Potential Risks: Oil prices are volatile, and government policies could affect fossil fuel investments. However, Chevron has low debt, a rock-solid balance sheet, and the ability to generate cash flow in any environment.

Opportunity: At just 10.1 P/E, Chevron is trading below its historical average (~13 P/E). This is a chance to buy a blue-chip dividend payer at a discount.

 

 

Final Thoughts: How to Use These Picks

 

Each of these high-yield dividend stocks presents a unique opportunity based on value, growth, and payout sustainability. Whether you prefer the stability of utilities (UGI), the comeback story (Ford), the cash cow of oil (Chevron), or the industrial players (LYB & Whirlpool), these stocks offer a balance of yield and growth potential.

 

Happy investing!