Income hunters looking for undervalued stocks have plenty to choose from at the moment. And one that’s offering a yield of 3.9% is likely to attract their attention. After all, this comfortably beats the level of interest available on an instant access savings account from a high street bank.
But I’ve found one stock that, as well as paying a near-4% dividend, has a price-to-earnings (P/E) ratio of less than 10. Does this sound too good to be true? Let’s take a look.
Who are we talking about?
The company’s MP Evans Group (LSE:MPE), a producer of sustainable palm oil in Indonesia. And for 35 years, it’s maintained or increased its dividend. In 2025, it reported earnings per share (EPS) of 161.3p. This means it has an attractive trailing 12-months P/E ratio of 9.5.
However, earnings in the agricultural sector can be volatile, as demonstrated by the group’s last six EPS numbers:
- 2025 – 161.3p
- 2024 – 129.6p
- 2023 – 78.1p
- 2022 – 108.0p
- 2021 – 115.6p
- 2020 – 29.2p
Weather conditions, disease, and erratic prices play a big part in determining its revenue and profit. These also put its dividend at risk.
A spanner in the works?
But a new threat emerged earlier this month (19 May), when the Indonesian government, concerned about a loss of tax revenue, announced that exports of palm oil would be overseen by a state-owned body.
On the day, MP Evans’ share price fell 27.8%.
However, the company was quick to point out that all of its output is sold locally and that “any changes to export mechanisms will not have a direct impact”.
But it did caution that there may be “some indirect impact as prices for the group’s output adjust to take account of new arrangements”. That’s because domestic refiners, to which MP Evans sells, could be affected.
Personally, I think the market’s over-reacted. As a result, now could be a good time to consider adding the stock to a long-term portfolio.
Be fearful when others are greedy and greedy when others are fearful
Why’s that?
The Indonesian government isn’t looking to stop exports, it’s just seeking to ensure that those in the industry pay what’s due.
After all, it would be silly to cut off earnings from one of its most important sectors. The global palm oil market is currently worth an estimated $75bn. And with palm oil continuing to be the world’s most traded vegetable oil, this is expected to grow to $114bn by 2035.
Importantly, as all of MP Evans’ output is sustainable, it’s able to achieve better yields and productivity than other producers.
In terms of dividend yield and earnings multiple, the stock also appears to be cheaper than that of its nearest rival, AEP Plantations, which owns, operates, and develops oil palm and rubber estates across Indonesia and Malaysia.
Impressively, MP Evans remains debt-free.
Final thought
Despite the obvious concerns about doing business in the region, the group’s been operating in the country since the 1960s. It’s also invested a huge amount of time and effort in developing good relationships with the Indonesian government.
On balance, I think it’s in both parties’ interests for the present arrangement to continue for many more decades. Personally, I believe MP Evans is a value stock that’s worth a closer look.
Should you invest £5,000 in M.p. Evans Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if M.p. Evans Group Plc made the list?
James Beard does not hold any positions in the companies mentioned.
