Low valuations combined with dividends have always been the value-hunter’s greatest dream. With price/earnings ratios below 11 and regular dividends, is the market undervaluing GlaxoSmithKline (LSE: GSK), Aberdeen Asset Management (LSE: ADN) and International Consolidated Airlines Group (LSE: IAG)?

Dividend cut ahead?

Emerging markets-focused asset manager Aberdeen has suffered 11 straight quarters of withdrawals due to poorly performing funds and the meltdown in developing economies. Plummeting share prices mean the company now offers an 8% yield and a P/E ratio of 11. While investors may find these numbers hard to resist, there could be worse to come for shares.

Earnings are expected to collapse by more than a third this year, which will barely cover dividend payouts. If major institutional clients continue fleeing Aberdeen’s funds, a dividend cut becomes very likely. And with any turnaround in market sentiment towards developing economies out of sight, I’m happy to sit on the sidelines and wait for a turnaround before plonking my money into shares.

Safe play

Pharmaceuticals giant GSK certainly appears to fit the bill of a bargain share, trading at a P/E of eight and offering a 5.8% yielding dividend. Unfortunately, this eye-catching valuation is due to one-off profits received from an asset swap deal with Novartis. GSK’s 2016 forecast P/E is a more reasonable 16 times earnings.

Despite this higher valuation, GSK could still be an attractive opportunity for investors. Management has shifted focus from being a pureplay drugs manufacturer to having a more diversified portfolio of drugs, consumer healthcare goods, and vaccines. The healthcare segment and vaccines now account for 26% and 16% of revenue, respectively, providing less lumpy revenue streams year-after-year.

The traditional pharmaceuticals division will still be there to provide growth for GSK, with the most promising option being a series of new HIV treatments. HIV treatments already contribute 29% of profits, and this number is expected to continue growing as GSK gains market share. Earnings are expected to grow 12% next year, and increase from there. A once-again-safely-covered dividend and growth potential make me think that GSK could be a relatively safe play for income-hungry investors going forward.

Proving us all wrong

The parent of British Airways and Iberia, IAG, has been proving wrong the long-held sentiment that airline shares were good for little more than losing your money. Share prices are up 145% over the past five years and yet the shares trade at a mere 6.7 times forward earnings. This low valuation and a 3.5% dividend pencilled-in for 2016 will surely have value investors eagerly adding the shares to their watch lists.

While plummeting oil prices have played their part, increased efficiency at both BA and Iberia have been the largest drivers of growth. In fact, fuel prices for the company fell only 6.3% last year while profits rose a full 51%. If the company were only doing well thanks to historically low oil prices, I would be wary of the shares. However, with the company expanding astutely only on high-margin routes and buying up stakes in turnaround carriers such as Aer Lingus, IAG does have the potential to break the mould and be an airline that actually provides high shareholder returns.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management and GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.