3 Sleeper Dividend Stocks to Buy for Massive Upside

AI-related growth stocks have delivered multibagger gains over the past few years, whereas reliable dividend stocks have been left behind. With Treasuries hovering above 5% for most of 2023 and 2024, income investors locked in government-backed income that easily beats the average S&P 500 yield without taking equity risk. And for growth investors, piling into dividend stocks didn’t make sense as the AI rally kept accelerating.

However, it’s a good idea to start buying dividend stocks on the dip before interest rate cuts eventually come. The Nasdaq 100 price–earnings ratio is near 2021 levels at 41x. AI could push that up even more, but increasing your exposure to undervalued dividend stocks gives you better risk-reward for the long run. You can also reinvest or cash in the yield while you wait for them to recover.

Here are three to look into:

Flowers Foods (FLO)

Flowers Foods (NYSE:FLO) has broken off its two-decade-long trajectory over the past three years as interest rates were hiked and the Ozempic trend crushed most snacks-related companies. This is a bakery business with historically stable growth and profitability. FLO stock is down 48.7% below its high.

The company also closed the $795 million acquisition of Simple Mills, a fast-growing but lower-margin natural snack maker. It added more debt to the balance sheet at the exact moment private-label bread is stealing shelf space and freight, flour, and labor inflation are still pressuring margins.

Flowers Foods now has $2.132 billion in debt, so the enterprise value (EV) is at $5.38 billion vs. the $3.26 billion market capitalization. The EV is around 17 times free cash flow, which is quite cheap, since investors have paid around 23 times EV. 

Free cash flow has been recovering and is likely to expand significantly once the economy stabilizes. It may take over a year for the turnaround to happen, but the company is solidly profitable, and revenue growth has remained neutral. I also expect lower egg prices to boost earnings this year. Bakeries have been specifically hit hard.

You can sit on the 6.44% forward yield as you wait for it to recover. The payout ratio is 87.34% and the company is just one year away from becoming a Dividend Aristocrat, so dividend cuts are highly unlikely.

Genuine Parts Co (GPC)

As of writing, Genuine Parts Co (NYSE:GPC) is just a day away from reporting earnings, so the near-term performance can be a bit volatile. However, I expect solid long-term upside due to the megatrends that go hand-in-hand with both of its main segments.

Genuine Parts derives 62.9% of its revenue from the Automotive segment and 37.1% of its revenue from the Industrial segment. This gives it plenty of exposure to the increasing demand for automotive parts and the onshoring trend, but tariff risks have kept investors in limbo. Earlier this year, Genuine Parts warned that it may miss guidance over tariffs.

Regardless, the tariff impact is unlikely to be enormous. 7% of its products are sourced from China, and less than 5% from Canada and Mexico each. The tariff impact is also not entirely on Genuine Parts, as manufacturers are taking on some burden too.

Even if it misses tomorrow, I see good upside long-term. The average passenger car is 14.5 years old. People owning these old cars are in a dilemma: either they buy a new one, pay higher insurance costs, and take on the high interest rates, or they could repair it. The latter choice is rational in this environment for the average Joe. The Industrial segment should also benefit from the domestic manufacturing comeback.

GPC comes with a 3.33% dividend yield and has hiked its dividends for 70 consecutive years. The payout ratio of 48.18% also leaves lots of room for dividend growth.

Booz Allen Hamilton (BAH)

Booz Allen Hamilton (NYSE:BAH) is the “OG” Palantir (NASDAQ:PLTR) that has been out of the spotlight for quite some time. DOGE cuts earlier this year and Palantir coming to the forefront have caused BAH stock to tumble over 40% from its peak. Booz Allen reported weaker-than-expected fiscal Q1 2025 results, with revenue and EBITDA both missing estimates.

I see BAH stock going right back up as DOGE cuts are much less of an issue, and the government has instead started spending more. Management believes this is a “one-time reset” and expects civil revenue to reaccelerate in the second half of the fiscal year. Plus, defense and intelligence units continue to perform well, with these segments expected to grow in double digits.

Analysts believe that once the civil business stabilizes after this year, Booz Allen should resume its prior growth rate in 2027. Historically, the company has grown at an 11.7% organic rate over the past three years. I expect the stock to make a full recovery in the next three years or less.

BAH stock comes with a 2.02% dividend yield and a 31.06% payout ratio. Dividends have been hiked for 14 consecutive years.

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