3 Outstanding Dividend Stocks That Are Too Cheap to Ignore

When dividend-paying companies go on sale, their yields increase, which can make them juicy passive income opportunities. But a dividend is only as good as the company paying it; meaning if you're going to invest in a beaten-down dividend-paying company, it has to be able to overcome whatever challenges it is going through.

United Parcel Service (NYSE: UPS) and Devon Energy (NYSE: DVN) are far from firing on all cylinders, but both companies have what it takes to find their footing. Meanwhile, the stock of Kinder Morgan (NYSE: KMI) just hit an eight-year high and could still be a great value.

Here's what makes all three dividend stocks great buys now, according to these Motley Fool contributors.

Daniel Foelber (United Parcel Service): UPS has a 22.2 price-to-earnings ratio (P/E) and a dividend yield of 4.8%. So right off the bat, it stands out as an intriguing high-yield value stock. But when a well-known industry leader has a depressed valuation or inflated yield, it is usually for good reasons.

UPS has seen a significant reduction in its sales growth and profitability in the past couple of years. As you can see in the following chart, it enjoyed a surge in sales and margins during the pandemic, but now the business is arguably worse off than it was pre-pandemic. Past success means little to investors, who tend to care more about where a company is headed than where it has been.

In March, UPS outlined a three-year plan to get back on course, with an emphasis on increasing delivery volumes in 2024 and operating margins in 2025 and 2026. It has made some progress on that plan, with higher delivery volumes in the second quarter, but it needs to sustain that momentum to impress investors.

The good news is that UPS remains highly committed to its dividend, although raises may be small for the foreseeable future until the company can show meaningful earnings growth, and thus justify a higher payout. But at a 4.8% yield, it is already offering income investors something to like, making it a worthwhile dividend stock to consider buying now.

Scott Levine (Devon Energy): For those looking to procure steady passive income, it can be incredibly exciting to find a compelling dividend stock.

But to find one sitting in the bargain bin? That's the icing on the cake -- and it's an opportunity that is available with Devon Energy, which offers a juicy forward dividend yield of 4.9%. Currently, shares of this leading oil stock trade at 3.8 times operating cash flow, representing a discount to the five-year average cash flow multiple of 4.