Stocks to buy

3 Undervalued Growth Stocks That Also Offer Attractive Dividends: April 2024

Investors consider blue-chip stocks for their portfolio with an objective of capital protection and regular dividend income. Growth stocks, on the other hand, provide robust capital gains and can create immense wealth. An interesting combination is, however, undervalued growth stocks with dividends.

It’s worth noting that some of the notable dividend aristocrats today were once growth ideas. Over the years, the business has grown and matured. Considering exposure to today’s growth stocks that could be future dividend aristocrats would be interesting. Further, I believe that dividend growth in these stocks will likely be stellar in the coming years.

Besides the dividend factor, these growth stocks will likely deliver 5-bagger returns in the next five years. Therefore, hold a long-term horizon for maximum wealth creation.

Let’s discuss the business factors that make these undervalued growth stocks worth considering.

Miniso Group (MNSO)

Source: shutterstock.com/Hendrick Wu

Lifestyle retailer Miniso Group (NYSE:MNSO) is among the attractive names to consider for growth and healthy dividends. MNSO stock trades at a forward price-earnings ratio of 16.5 and offers a dividend yield of 2%. The valuation gap is clear for this growth story and high total returns in the next 24 months.

For Q2 2024, Miniso reported revenue growth of 54% on a year-on-year basis to $541 million. The adjusted EBITDA margin was 200 basis points higher at 25.9% for the same period. Opening 973 new stores growth fuelled this growth on a year-on-year basis. Of this, 372 stores were in the overseas market.

With ample room for global expansion, expect robust growth to be sustained. Miniso is targeting opening 900 to 1,000 new stores per year through 2028. A dynamic product portfolio and favorable product mix are other factors that will support growth and EBITDA margin expansion. Expect a healthy upside in dividends in the coming years.

Kinross Gold (KGC)

Cellphone with business logo of Canadian mining company Kinross Gold Corp. on screen in front of webpage.

Source: T. Schneider / Shutterstock.com

It’s a good time to remain invested in gold mining stocks as gold surges. Kinross Gold (NYSE:KGC) is an undervalued gold miner with a current dividend yield of 1.96%. KGC stock has trended higher by 33% in the last 12 months, but the best part of the rally is still due.

Talking about dividends, Kinross has a strong balance sheet and ended 2023 with a liquidity buffer of $1.9 billion. Further, the company reported operating cash flow of $1.7 billion last year. With gold trading above $2,200 an ounce, OCF will likely be more than $2 billion in 2024. Therefore, there is clear visibility for healthy dividend growth.

At the same time, the financial flexibility provides headroom for organic and acquisition-driven growth. In 2022, Kinross had to sell Russian assets due to geopolitical reasons. That’s likely to be compensated with an asset acquisition to boost production growth in the next few years. For now, I see significant value creation through dividends and share repurchases.

Borr Drilling (BORR)

Source: iStock

Borr Drilling (NYSE:BORR) is an undervalued, under-the-radar dividend stock with high growth potential. The offshore drilling services provider has been depressed in the last 12 months. The reason is lower energy prices on the back of macroeconomic headwinds. However, with rate cuts impending, I am bullish on oil and BORR stock is likely to surge higher.

The first point to note is that as of December 2023, Borr reported an order backlog of $1.75 billion. As oil trends higher, I expect order intake to be robust, which will set the stage for healthy revenue and EBITDA growth.

It’s worth noting that Borr reported adjusted EBITDA of $351 million last year. The company has guided for an adjusted EBITDA of $525 million for the current year. This would imply a year-on-year growth of 50%. Clearly, with a robust growth trajectory, BORR is undervalued. Further, the stock offers a dividend yield of 1.47%. Considering the growth outlook, expect a healthy upside in dividends.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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