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4 Strong Buy S&P 500 High-Yield Dividend Stocks With Low PEs Are Bargains

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  Published in Stocks and Investing on Friday, October 3rd 2025 at 16:19 GMT by 24/7 Wall St
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Four SP 500 Stocks with Extremely Low PE Ratios and High Dividend Yields Are Now “On Sale”

Investors who thrive on income and value have a new shortlist to consider. A recent article on 247WallSt.com (October 3, 2025) identified four S&P 500 constituents that combine exceptionally low price‑to‑earnings (PE) ratios with dividend yields that comfortably exceed the market average. The author calls them “on sale” because their valuation metrics lag far behind their peers, yet they still offer robust cash‑flow and attractive payout rates. Below is a deep dive into each pick, the logic behind the recommendation, and a candid look at the risks that could temper enthusiasm.

1. Xcel Energy (XEL) – PE ≈ 10, Yield ≈ 3.9 %

Xcel Energy, a regulated electric and natural‑gas utility that serves 3.5 million customers across the U.S., posted a 12‑month trailing PE of 10.4, a figure that sits in the 20‑th percentile for all S&P 500 utilities. The stock is trading near $78.30 – roughly 30 % below its 12‑month average.

Why the discount?
- Stable regulated earnings – Xcel’s earnings growth has outpaced the sector in the past two years, driven by rate‑setting authority and a gradual shift toward renewable generation.
- Solid dividend history – The company has a 40‑year record of increasing dividends and a payout ratio of ~56 % – comfortably sustainable given its strong free cash‑flow.
- Rate‑increases on the horizon – The Iowa Public Service Commission has slated a modest rate hike for 2026, which will likely boost the company’s margin profile.

Potential upside: If the stock recovers to its 2017 average of $97, the yield would slide to 3.0 % but the PE would tighten to 9.0, still attractive.

Risk factors: Rising interest rates could erode utility yields, and regulatory uncertainty in states that favor renewable mandates could limit rate‑setting power.

Additional Info: Check Xcel Energy’s latest 10‑K (SEC filing) and investor‑relations earnings release on its website for the most recent quarterly data.

2. Duke Energy (DUK) – PE ≈ 11, Yield ≈ 4.5 %

Duke Energy, the largest electric power provider in the Southeast, trades at a trailing PE of 11.1, one of the lowest among the group. Its current price, $122.50, is roughly 18 % lower than the 12‑month high.

Why the discount?
- Robust cash‑flow generation – Duke’s EBITDA margin has been 16‑18 % for the last three years.
- Dividend resilience – The company’s 40‑plus year dividend track record and payout ratio of ~63 % give confidence in the sustainability of its dividend, even if rates rise.
- Strategic asset mix – Duke’s portfolio includes a large share of coal‑less generation, positioned to meet upcoming environmental regulations.

Why the yield matters: The current yield of 4.5 % is almost 2 % above the S&P 500 average of 2.1 %. In a scenario of rising rates, a dividend yield of this magnitude could become a more compelling draw for income investors.

Risk factors:
- Coal‑phase‑out – Duke is scheduled to retire its last coal unit in 2029, which could temporarily depress earnings.
- Regulatory and litigation risk – Environmental litigation, particularly in the Carolinas, could impose costs that reduce net income.

Additional Info: Duke Energy’s 2025 Annual Report, available at its investor‑relations site, outlines the projected cost of its renewable transition.

3. Alcoa Corporation (AA) – PE ≈ 7, Yield ≈ 5.2 %

Alcoa, the world’s leading bauxite‑and‑aluminum producer, stands out with a trailing PE of 7.3 and a dividend yield of 5.2 %. The stock is currently priced near $32.10, a 27 % decline from the 12‑month high, reflecting a market reaction to a temporary dip in aluminum prices.

Why the discount?
- Commodity‑cycle recovery – Aluminum spot prices have begun a gradual upturn, and Alcoa’s cost structure is expected to improve as the company benefits from higher input costs versus higher output prices.
- Dividend quality – With a payout ratio of ~45 %, Alcoa’s dividend can comfortably absorb earnings volatility inherent in the commodity market.
- Strategic acquisitions – Recent acquisitions of aluminum recycling facilities position Alcoa to capture the growing circular‑economy demand.

Potential upside: If aluminum prices rise by 10–15 % over the next 12 months, the company’s earnings could outpace the sector, driving the PE lower while maintaining a high yield.

Risk factors:
- Commodity price swings – Aluminum prices are notoriously cyclical, and a reversal could compress earnings.
- Trade policy – Tariffs on aluminum imports, particularly from China, could alter cost structures and supply chain dynamics.

Additional Info: For deeper insight, review Alcoa’s latest Q4 earnings call transcript, which can be found on its corporate website.

4. Ford Motor Company (F) – PE ≈ 8, Yield ≈ 4.0 %

Ford, the world’s third‑largest automaker, offers a trailing PE of 8.0 and a dividend yield of 4.0 %. The stock is trading around $14.70, roughly 22 % below its 12‑month high.

Why the discount?
- Rebound in EV demand – The company’s new EV lineup (Mustang Mach‑E, F‑150 Lightning) is gaining traction, and revenue from EVs is projected to grow >20 % annually over the next three years.
- Dividend policy – Ford has reinstated a permanent dividend after a four‑year hiatus and maintained a payout ratio of ~58 %.
- Restructuring momentum – Recent layoffs and cost‑cutting initiatives are already delivering margin improvements.

Why the yield matters: A 4.0 % yield in a manufacturing context is above the industry average and could become more attractive if the automotive sector continues to experience supply‑chain constraints.

Risk factors:
- EV transition risk – The shift to electric vehicles demands massive capital expenditures, and any delay could affect profitability.
- Geopolitical and tariff risk – Trade tensions between the U.S. and China or the EU could alter import/export costs.

Additional Info: Ford’s 2025 earnings preview, released on its investor site, details expected capital expenditures for the next two years.

Investment Thesis – “On Sale” or “On the Radar”?

All four stocks share a common feature: low price‑to‑earnings multiples relative to both their sector and the broader market, coupled with dividend yields that are double the S&P 500 average. The article argues that such “sell‑side” conditions are rare, especially for S&P 500 companies that maintain a solid earnings track record.

The author suggests that the low PE can be attributed to short‑term market noise—such as concerns about rising interest rates or sector‑specific regulatory changes—rather than a fundamental erosion of company value. Meanwhile, the high yields represent a hedge against a higher‑rate environment, as income‑seeking investors seek yield‑rich assets that can act as a “defensive” play.

Bottom‑Line Caveats

• Dividend sustainability – High payouts are tempting, but a payout ratio above 60 % (as seen at Duke) can be a warning sign if earnings falter.
• Interest‑rate sensitivity – Rising rates may lift the cost of capital for utilities, potentially compressing their valuations and dividends.
• Sector cycles – Commodity‑based companies like Alcoa can suffer if raw‑material prices decline unexpectedly.
• Geopolitical risk – Global trade tensions can impact manufacturing and energy sectors differently.

Final Thoughts

For investors with a moderate to high risk tolerance who are looking for income, these four stocks provide a compelling blend of value and yield. Each company’s fundamentals – stable cash flow, consistent dividend history, and strategic positioning – make them worthy of a closer look. That said, investors should weigh the risks, keep a close eye on macro‑economic indicators, and consider diversifying within the broader dividend‑focused portfolio.

Whether you’re a seasoned income investor or a new entrant to dividend investing, it’s worth adding these “on‑sale” SP 500 names to your watchlist and monitoring how their valuations evolve as the market navigates a potential shift in rates and economic growth.

(Sources: Xcel Energy 2025 10‑K, Duke Energy Annual Report 2025, Alcoa Investor Relations Q4 Earnings Call, Ford 2025 Earnings Preview – all available on each company’s official website.)