To The Moon

With the Fed's rate cuts looming, investors would be wise to add some undervalued dividend stocks to their portfolios while maintaining a cautious optimism.

The beauty of buying undervalued dividend stocks is that, even if the market takes a dip, these stocks have limited downside, especially the blue-chip ones with lower risk. And if the market continues to soar, these stocks are likely to bounce back in a valuation repair.

1.Vale

$Vale SA(VALE)$ is probably the most underrated dividend stock in the industrial commodity space. With a forward P/E ratio of just 5.18 and a dividend yield of a whopping 14.28%, this stock is a steal! After being stuck in a sideways pattern for a while, it's primed for an upward breakout.

Fundamentally, Vale's diversified business and the rising trend in iron ore prices are laying the foundation for a breakout in its stock price. Its robust quarterly earnings also point to a possible valuation repair.

2.Chevron

$Chevron(CVX)$ is one of the most undervalued oil and gas stocks worth buying. The stock has been range-bound for the past 12 months, but with high oil prices and stellar quarterly earnings, it's racked up an 11% return year-to-date. And this positive momentum is expected to continue.

With oil prices on the rise, energy producers are seeing their profits and stock prices surge. If oil prices continue to climb, Chevron's annual operating cash flow is expected to exceed $30 billion. That gives them plenty of flexibility to invest in exploration and dividend growth. Currently, Chevron stock offers a dividend yield of 3.93%.

3.Barrick Gold

Gold prices have been on an upward trajectory this year, and the precious metal's rally is likely to stay positive. So, it's still a good time to pick undervalued gold mining stocks for healthy returns.

$Barrick Gold Corp(GOLD)$ is still down 12% from a year ago, but its forward P/E ratio of 16.98 and a dividend yield of 2.34% make it quite attractive. With increasing production in the coming quarters, the stock is poised to resume its upward trend.

Moreover, as gold trades above $2,300 per ounce, Barrick's EBITDA margins are likely to expand even further. And with that cash flow coming in, Barrick will have the ability to hike its dividends.