3 Undervalued Dividend Stocks for Passive Income Investors to Buy in August

Some of the biggest investing mistakes are driven by emotion, such as panic-selling shares in quality companies, selling a winning stock too soon just because it has run up, or buying shares in a hot stock just to make a quick buck without having a long-term investment thesis. But there are ways that you can reduce the effect of emotion on your decision-making process.

Stocks that pay dividends can help take some of the emotion out of the equation, since they pay investors passive income simply via them holding the stock. That way, investors can get a return and raise some money without having to sell anything.

United Parcel Service (UPS 0.21%), Freeport-McMoRan (FCX 2.44%), and Texas Instruments (NASDAQ: TXN) have high yields, but they are in the bargain bin despite the S&P 500 (^GSPC 0.78%) hovering around an all-time high. Here’s why all three dividend stocks are worth buying now.

Big Brown presents a big bargain opportunity for investors to earn major passive income

Scott Levine (United Parcel Service): After sinking 28% since the start of the year as of this writing, United Parcel Service stock’s poor performance is even more disconcerting in light of the 8.3% rise in the S&P 500.

As a result of the fall, shares of the leading logistics company are now sitting in the bargain bin, giving investors a great opportunity to pick it up — along with its 7.2% forward-yielding dividend — at a discount to its historic valuation.

The stock’s decline reflects how investors are skittish about the company’s year-over-year declines in revenue and earnings stemming from higher costs. A lack of clarity about how international trade policy will affect the company’s financials represents another major concern raised during the second-quarter 2025 financial results presentation.

While these issues are valid, prospective investors shouldn’t assume that higher costs in the near term and questions about tariffs will keep UPS from returning to growth. For one, management projects to achieve $3.5 billion in cost reductions in 2025, thanks to its network reconfiguration and Efficiency Reimagined initiatives.

With respect to the dividend, skeptics may question the payout’s sustainability, considering the challenges that lie before the company. Management, however, has taken a judicious approach to rewarding shareholders. Over the past five years, UPS has averaged a 76.9% payout ratio, so investors can be confident that management is prioritizing the company’s financial health.

There may be some further bumps in the road in the near future, but investors with long investment horizons who are comfortable with enduring some near-term volatility should be rewarded in the long term with a UPS investment today.

The pick of the copper mining sector

Lee Samaha (Freeport-McMoRan): This leading copper company’s stock sank recently after the Trump administration exempted imports of refined copper from 50% tariffs. The tariff will be applied to semi-finished products, but not to refined copper. That’s bad news for Freeport-McMoRan, a company that has about a third of its copper in the U.S. and produces more than 70% of the refined copper in the U.S.

It’s also bad news for speculators who had bid up the U.S. price of copper to a more than 25% premium over the international price in anticipation of tariffs on refined copper imports. The announcement sent Freeport’s stock price down, and the premium disappeared.

Still, investors shouldn’t lose sight of the fact that the stock is still a great value. For example, management argues that it will generate $8.5 billion in operating cash flow in 2026/2027 at a copper price of $4 per pound, and $11 billion at a price of $5 per pound.

The update from the Trump administration sent the U.S. copper price tumbling from above $5.75 per pound down to about $4.35 per pound. Plugging that figure into Freeport’s model implies an operating cash flow of about $9.55 billion in 2026/2027. Based on the current market cap of $56 billion, it implies a price to operating cash flow of 5.9 times.

That’s cheap on an absolute and historical basis.

FCX Price to CFO Per Share (TTM) data by YCharts. CFO = cash flow from operating activities.

As such, this 1.5%-yielding stock looks like a great value, whether refined copper imports are tariffed or not.

Texas Instruments is a buy during this cyclical slowdown

Daniel Foelber (Texas Instruments): Texas Instruments, commonly known as TI, underwent a significant sell-off after reporting second-quarter 2025 earnings. The headline results were solid, including a 16% jump in revenue and earnings per share (EPS). However, the semiconductor stalwart is seeing weakness across key end markets, especially automotive. Tariff risks also continue to cast a cloud over TI’s ability to forecast near-term growth.

Despite the choppy outlook, TI remains an excellent passive income opportunity, especially for investors interested in the semiconductor industry. TI makes analog and embedded processing products that are essential components across the economy. Applications include automation for factories and industrial customers, medical equipment, smart grids, automotive sensors and systems, personal electronics, and more.

TI is unique in that it does most of its own manufacturing, which is a stark contrast to fabless semiconductor companies like Nvidia, which relies on foundries like Taiwan Semiconductor Manufacturing to make its chips. TI’s vertically integrated approach makes it a more capital-intensive business, but it also gives it greater control over its supply chain.

Overall, TI’s business model is well-positioned for steady growth over time, but it won’t offer the kind of breakneck growth potential found in companies on the cutting edge of artificial intelligence. However, TI could be a great stock for dividend investors.

TI sports a 2.9% dividend yield, which is hard to find in the tech sector. For context, another well-known dividend-paying chip stock — Qualcomm — yields 2.1%, and Applied Materials, Lam Research, and Broadcom now yield less than 1%.

TI is also a good value relative to its earnings growth. It’s a cyclical company, so its valuation will look expensive during slowdowns and more expensive during expansion periods. Despite earnings being around their lowest level in five years, TI still sports a price-to-earnings (P/E) ratio of 35.8. But TI’s valuation could look a lot cheaper if the stock price continues to stagnate.

Consensus analyst estimates call for $6.65 in 2026 EPS — which would give TI a 28.4 P/E ratio based on its share price at the time of this writing. But again, because TI is cyclical, it’s best not to read too much into short-term changes in its valuation. Rather, look at the long-term potential of its earnings growth.

TI is a good buy for dividend investors because it plays a foundational role in global connectivity and stands to benefit from innovation in automation and robotics.