Many retail investors fear selloffs. But if you know where to look, pullbacks can be your best friend. If you look at any stock that pulled off a significant recovery from its trough, your natural reaction is likely “I wish I bought that dip!” However, it’s understandable why many refuse to buy the dip. Many stocks that do go down turn into falling knives. When it comes to well-established dividend payers, the equation is in your favor.
Instead of praying for a recovery, you get paid to wait, and that stream of dividends quietly compounds while the market decides whether it still wants to sit on the sidelines. Chances are, the market will decide to pounce, especially since the economy is sitting at a crossroads. Interest rates are expected to be cut soon, making dividend yields more attractive. Plus, undervalued dividend stocks with established underlying businesses are very likely to rebound in the long run. This gives investors both upside and dividends.
Here are three such dividend stocks to look into.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) has been facing a myriad of problems in the past year. It started with the Brian Thompson assassination, and it went downhill from there. The company started missing earnings estimates, withdrew its guidance and the group’s CEO resigned.
The latest earnings report kept investors in limbo as it missed estimates again, without giving investors a concrete outlook on where things were heading for the year. However, the stock is up nearly 28% over the past month and recently announced plans to reiterate its adjusted EPS outlook for the full year. In late July, it projected $16 in EPS on $445.5 to $448 billion in revenue, below analyst estimates of $16.24 and $448.2 billion.
I expect UNH stock to recover in the long run. Many investors think it is plausible that the financial issues were due to UnitedHealth getting spooked after the tragic event surrounding its CEO and then accepting claims more aggressively.
Regardless, UnitedHealth remains the largest health insurance company, and conditions are normalizing. Investors should get more clarity with the full-year guidance, and I expect UNH stock to climb back to trading near historical premiums over the next 24-36 months.
At its current P/E ratio, investors pay 13.7 times earnings for UNH. Historically, the median has been ~22 times. You can snag it at that discount and get a 2.79% dividend yield at the same time.
United Parcel Service (UPS)
United Parcel Service (NYSE:UPS | UPS Price Prediction) is also trading at a considerable dip, but it is more due to a gradual decline from euphoric levels seen in 2021. UPS stock is off 32% from 2019 prices and ~63% from its peak in early 2022.
The company has been downsizing in certain areas and shifting its strategy to become a higher-margin business. UPS is undergoing a multi-year transformation under CEO Carol Tomé’s “Better Not Bigger” strategy, where the company is prioritizing profits over growth.
Analysts believe it will work. They see one last year of negative EPS growth in 2025, with EPS going down 14.9%. EPS is expected to recover 11.5% next year and accelerate thereafter. Revenue is also expected to decline 3.9% this year and recover in the coming years.
Most of the decline is due to the company dealing with post-COVID ripple effects and shedding low-margin lines. 2019 revenue was $74.1 billion, and 2024 revenue was $91.1 billion after peaking at $100.3 billion in 2022.
Once the business normalizes, it will look a lot juicier and can rebound by 60% to 70%. Investors have historically paid ~20 times earnings for the stock, and you can get it today for a little over 12 times earnings.
The dividend yield is 7.79% with a payout ratio of 87%. Dividends have been raised for 16 consecutive years.
Clorox (CLX)
Clorox (NYSE:CLX) needs no introduction. It is a household name with stable, consistent demand. The stock itself hasn’t reflected that in recent years, as CLX stock is down 41.2% over the past five years.
The culprit is again the ripple effects from the pandemic, as consumers cut down spending on cleaning/disinfecting products. On top of that, interest rates and inflation caused margins to compress. Financials have been normalizing since then, and the bottom may be in. Revenue grew 4.5% to almost $2 billion, beating estimates by 3.21%. EPS also beat estimates by 29.75% in Q2 2025.
As interest rates get cut and sales stabilize, CLX stock should trade near its historical levels. It currently has a 3.94% dividend yield and is nearly a Dividend King, with 48 consecutive years of dividend increases.
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