2 Wonderful Dividends at Bargain Basement Prices

In today’s market, finding dividend-paying stocks that offer both income stability and valuation upside is a rare gem. Two companies, Edison International (EIX) and Brookfield Renewable Partners (BEP), stand out as exceptional opportunities. Both boast high dividend yields, strong track records, and are trading at significant discounts to their fair value. Let’s dive into why these stocks deserve a closer look.

1. Edison International (EIX): A Utility Giant with a 6.45% Yield

Edison International, a Dividend Aristocrat with 21 consecutive years of dividend increases, operates in California’s booming energy market.

Why It’s a Bargain

• Price/Fair Value Ratio: 0.64 (36% undervalued relative to a $80 fair value estimate).
• Dividend Yield: 6.45%, well above the S&P 500’s average of ~1.8%.
• Growth Catalysts:
• $7 billion annually in grid modernization investments through 2028.
• Regulatory support via California’s AB 1054 legislation, which decouples earnings from wildfire liabilities.

Risk Factors

While wildfire-related legal challenges persist, Edison’s narrow economic moat and regulatory recovery mechanisms mitigate downside.

Key Metrics

• P/E Ratio: 14.64 (vs. a 10-year average of 28.41), reflecting a 48% valuation discount.
• Payout Ratio: 54%, sustainable given its regulated cash flows.

2. Brookfield Renewable Partners (BEP): Renewable Power at 6.53% Yield

BEP is a global leader in renewable energy, with a focus on hydro, wind, and solar assets. Its diversified portfolio and long-term contracts make it a low-risk, high-yield play.

Why It’s Undervalued

• Price/Fair Value Ratio: 0.79 (21% undervalued relative to a $29 estimate).
• Dividend Yield: 6.53%, supported by stable cash flows from long-term power purchase agreements (PPAs).
• Growth Catalysts:
• Transitioning to solar dominance (now 15-20% of assets, targeting 50% by 2030).
• $19 billion in new projects under development, driving 12-15% annual returns.

Risk Factors

Geopolitical risks and commodity price fluctuations could impact project economics, but BEP’s geographic diversification (e.g., North America, Europe, Asia) limits exposure.

Key Metrics

• P/E Ratio: 18.2 (vs. the Utilities Sector average of 22.50).
• Debt-to-Equity: 1.5x, manageable given its regulated and contracted revenue streams.

Why Now Is the Time to Buy

Both EIX and BEP offer double-digit total return potential through dividends and valuation expansion.

• Edison International: A 36% undervaluation suggests a $80 fair value, implying ~60% upside from its current price (~$48).
• Brookfield Renewable: At 21% undervalued, its $29 fair value leaves room for ~40% appreciation.

Sector Tailwinds

• Utilities: Regulated rate hikes and clean energy mandates (e.g., California’s grid modernization) favor EIX.
• Renewables: Global decarbonization policies are a tailwind for BEP’s asset-heavy model.

Conclusion: Buy These Dividend Kings While the Discount Lasts

Edison International and Brookfield Renewable Partners are two of the market’s most compelling dividend bargains. With high yields, strong balance sheets, and undiscounted valuations, they offer a rare combination of income and capital appreciation potential.

Final Takeaways:
1. EIX is a “buy” at current levels, targeting $80 by 2026.
2. BEP is a “strong buy”, with a $29 fair value and a 6.5% yield.

Investors seeking steady income and growth should act quickly—these discounts won’t last forever.

Data as of May 2025. Always conduct your own research and consult a financial advisor.