This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Most Undervalued Stocks in the S&P 500

Stocks in this article: WMT KMB LLY

By Ryan Fuhrmann

NEW YORK ( TheStreet ) -- Wal-Mart (WMT), Abbott Labs (ABT), Kimberly-Clark (KMB), Coca-Cola (KO) and Eli Lilly (LLY) are five companies in the S&P 500 with the best dividend growth and earnings prospects.

Dividend-paying stocks are appealing because they have a track record of beating the broader stock market. Focusing on the most undervalued names of the S&P's so-called dividend aristocrats means investing in the most undervalued companies.

>>Also: 21 S&P 500 Stocks Up More Than 40%

The companies mentioned here also offer downside protection, given their products can be considered recession-resistant. For those particularly inclined to high dividend payments, Kimberly-Clark and Eli Lilly stand out from the rest.

Wal-Mart (WMT)

Business: World's Largest Retailer

Current P/E ratio: 13.9

Current dividend yield: 2.3%

I recently concluded that Wal-Mart is the one blue-chip that every investor should own, which stems from the fact that it is one of the safest investments out there (Read The One Blue-Chip Stock Every Investor Should Own). First, it is using its impressive profit generation in the United States to fund overseas growth. This strategy has allowed sales to grow at least +10% annually during the past decade.

Sales should grow in the high single digits going forward, but cost containment and other productivity enhancements should push profits up in the double digits each year going forward. Wal-Mart is also an ideal pick for investors worried about a double-dip recession or a failure of the global economy to recover fully from the credit crisis. Given its additional focus on dividends and ability to boost the payout over time, this stock pick is hard to argue against.

Abbott Labs (ABT)

Business: Pharmaceuticals

Current P/E ratio: 15.5

Current Dividend Yield: 3.3%

Abbott is a healthcare bellwether and has a globally diversified business across a number of different product categories. In addition to pharmaceutical sales, it sells medical devices and consumer products, such as Similac baby formula. Abbot's sights are also set overseas, and it recently announced a deal that will make it one of the largest healthcare firms in India. A low P/E, high and rising dividend yield, and double-digit growth prospects over the long haul make this an undervalued stock at current prices.


Business: Consumer Goods

Current P/E ratio: 14.0

Current Dividend Yield: 4.1%

Kimberly-Clark used to qualify as a stodgy consumer goods firm, but has become religious on controlling costs. In the past three years, it has been able to leverage modest sales growth of under 4% per year into double-digit earnings increases that have averaged nearly 12% annually. A 4.1% dividend yield also makes it one of the most generous payers out of all the dividend aristocrats. Dividend stability and improved profit growth mean Kimberly-Clark also stands out as one of the most undervalued names in the S&P 500.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs