In this article, we discuss 10 undervalued dividend aristocrats to buy in 2022. If you want to skip our detailed analysis of these stocks, go directly to 5 Undervalued Dividend Aristocrats to Buy in 2022.
Dividend aristocrats are S&P 500 constituents that have consistently grown their dividend payments for at least 25 years or more. These companies have strong cash flows, reliable market performance, and are usually mature stocks that survive market turbulence. U.S. markets strategist Dave Sekera joined Morningstar on February 2, emphasizing on the expected outperformance of value stocks over growth stocks in 2022. The prospects for both, the undervalued dividend payers and non-dividend stocks, are looking positive, according to Sekera.
Dividend Stocks as Inflation Hedge
At the end of 2021, Kevin Mahn, Hennion & Walsh Asset Management president and CIO, joined CNBC, stating that dividend paying stocks offer the best inflation hedge. He also stressed upon the shift from growth to value plays heading into 2022, and how investors should look out for the price potential as compared to the respective income potential when picking out the most feasible stocks for their portfolio.
It is important to invest not only in high yielding companies, but to make sure that those companies can realistically afford to pay out the amounts to shareholders that they have advertised. This is why investors gravitate towards dividend aristocrats, since these stocks have a solid history of paying consecutively increasing dividends, despite stock market fluctuations and volatility.
Some of the most notable undervalued dividend stocks to invest in include Walgreens Boots Alliance, Inc. (NASDAQ:WBA), Chevron Corporation (NYSE:CVX), and Exxon Mobil Corporation (NYSE:XOM), among others discussed in detail below.
Photo by Dan Dennis on Unsplash
Our Methodology
We selected dividend aristocrats that have a price to earnings ratio of less than 20, ensuring that the stocks have recently received mostly positive analyst ratings. This list is ranked based on the hedge fund sentiment around the holdings, which was assessed from the 924 elite funds monitored by Insider Monkey as of Q4 2021.
Undervalued Dividend Aristocrats to Buy in 2022
10. V.F. Corporation (NYSE:VFC)
Number of Hedge Fund Holders: 21
Dividend Yield as of February 25: 3.41%
Number of Years of Consecutive Dividend Increases: 49
P/E Ratio: 16.53
V.F. Corporation (NYSE:VFC) designs and markets branded apparel, footwear, and fashion accessories for customers in the Americas, Europe, and the Asia Pacific. V.F. Corporation (NYSE:VFC)’s history of consecutively increasing dividends dates back to 49 years.
On January 28, V.F. Corporation (NYSE:VFC) declared a $0.50 per share quarterly dividend, in line with previous. The dividend is payable on March 21, to shareholders of record on March 10. The stock yields 3.41% as of February 25.
V.F. Corporation (NYSE:VFC) reported its fourth quarter results on January 28, posting earnings per share of $1.35, exceeding estimates by $0.13. The $3.62 billion revenue was also $18.05 million above market consensus.
Deutsche Bank analyst Gabriella Carbone on January 31 lowered the price target on V.F. Corporation (NYSE:VFC) to $86 from $94 and kept a Buy rating on the shares. While the Q4 earnings beat estimate, the main focus revolved around the relative weakness at Vans, with management outlining issues that raise questions around the viability of a meaningful top-line reacceleration, the analyst told investors in a research note.
The Q4 database of Insider Monkey suggests that 21 elite hedge funds were bullish on V.F. Corporation (NYSE:VFC), with combined stakes valued at $110.8 million. Ric Dillon’s Diamond Hill Capital is the largest shareholder of V.F. Corporation (NYSE:VFC), with 5.90 million shares worth $432.3 million.
In addition to Walgreens Boots Alliance, Inc. (NASDAQ:WBA), Chevron Corporation (NYSE:CVX), and Exxon Mobil Corporation (NYSE:XOM), V.F. Corporation (NYSE:VFC) is a notable undervalued dividend aristocrat on the radar of smart investors.
9. People’s United Financial, Inc. (NASDAQ:PBCT)
Number of Hedge Fund Holders: 26
Dividend Yield as of February 25: 3.45%
Number of Years of Consecutive Dividend Increases: 28
P/E Ratio: 15.21
People’s United Financial, Inc. (NASDAQ:PBCT) is the bank holding company for People’s United Bank, offering financial services including commercial banking, retail banking, and wealth management to individuals, corporate, and municipal customers. People’s United Financial, Inc. (NASDAQ:PBCT)’s rich dividend history dates back to 28 years, with the firm consistently growing its dividends over the period.
People’s United Financial, Inc. (NASDAQ:PBCT) announced on January 20 its Q4 results, posting an EPS of $0.36, beating consensus estimates by $0.03. The company reported full year operating earnings of $628.6 million, which increased 18% from a year ago and generated an operating return on average tangible common equity of 13.6%.
On January 21, People’s United Financial, Inc. (NASDAQ:PBCT) declared a $0.1825 per share quarterly dividend, in line with previous. The dividend was paid on February 15. The company offers a 3.45% yield as of February 25.
Among the hedge funds tracked by Insider Monkey, 26 funds reported owning stakes in People’s United Financial, Inc. (NASDAQ:PBCT), up from 19 funds in the prior quarter. Magnetar Capital is the biggest shareholder of the company, with 6.45 million shares worth $115 million.
8. Nucor Corporation (NYSE:NUE)
Number of Hedge Fund Holders: 26
Dividend Yield as of February 25: 1.54%
Number of Years of Consecutive Dividend Increases: 49
P/E Ratio (TTM): 5.62
Nucor Corporation (NYSE:NUE) is one of the most undervalued dividend aristocrats to buy in 2022, with a history of increasing its dividends consecutively for 49 years. Nucor Corporation (NYSE:NUE) is a North Carolina-based company that manufactures and sells steel and steel products.
On February 22, Nucor Corporation (NYSE:NUE) declared a quarterly dividend of $0.50 per share, in line with previous. The dividend is payable on May 11, to shareholders of record on March 31. Nucor Corporation (NYSE:NUE)’s dividend yield on February 25 came in at 1.54%.
Nucor Corporation (NYSE:NUE) reported its Q4 earnings on January 27, posting an EPS of $8.04, outperforming market consensus estimates by $0.19. Revenue over the period was $10.36 billion, up 97.04% year-over-year.
Goldman Sachs analyst Emily Chieng on February 15 raised the price target on Nucor Corporation (NYSE:NUE) to $120 from $114 and kept a Neutral rating on the shares as part of a broader research note on Metals & Mining. The analyst updated her model based on refreshed commodity price assumptions, also making adjustments to shipments and costs.
AQR Capital Management is one of the largest shareholders of Nucor Corporation (NYSE:NUE), with 469,425 shares worth more than $53 million. Overall, 26 hedge funds were bullish on the stock at the end of December 2021.
Here is what Madison Funds has to say about Nucor Corporation (NYSE:NUE) in their Q1 2021 investor letter:
“This quarter we are highlighting Nucor (NUE) as a relative yield example within the Materials sector. NUE is a leading manufacturer of steel and steel products. It is the largest steelmaker in the U.S. based on production volume with a vertically integrated business model. The company has a low fixed-cost position due to its use of electric arc furnaces, which are cleaner, less labor and energy-intensive than blast furnaces, and this results in low total costs per unit of steel produced. Our view is that a low cost position is an important attribute in a commodity business. NUE’s historical financial record supports this view as it has been profitable every year except for one over the past fifty years, unlike many steel producing peers. In addition, the company has a diverse product and mill portfolio that takes market share over time. We believe its scale, low fixed-cost position, consistent record of profitability and diverse mill portfolio result in a sustainable competitive advantage versus peers.
Our thesis on NUE is that it should benefit from higher steel prices as the U.S. economy recovers from the downturn caused by the Covid-19 pandemic. The company may also be a beneficiary of on-shoring, where manufacturing returns to the United States. These two dynamics should drive growth this year, and if the United States Congress passes new infrastructure legislation, that will provide another avenue for growth longer-term. (Click here to read full text)
7. Franklin Resources, Inc. (NYSE:BEN)
Number of Hedge Fund Holders: 29
Dividend Yield as of February 25: 3.84%
Number of Years of Consecutive Dividend Increases: 42
P/E Ratio: 7.98
Franklin Resources, Inc. (NYSE:BEN) is a California-based asset management holding company, investing in the public equity, fixed income, and alternative markets. With a price to earnings ratio of 7.98, Franklin Resources, Inc. (NYSE:BEN) is one of the most undervalued dividend aristocrats to buy in 2022.
On February 1, Franklin Resources, Inc. (NYSE:BEN) announced earnings for the fourth quarter. The company posted an EPS of $1.08, above market estimates by $0.19. Franklin Resources, Inc. (NYSE:BEN)’s $2.20 billion revenue exceeded estimates by $4.50 million.
Franklin Resources, Inc. (NYSE:BEN) on February 23 declared a $0.29 per share quarterly dividend, a 4.0% increase from its prior dividend of $0.28. The dividend is payable on April 14, for shareholders of record on March 31. Franklin Resources, Inc. (NYSE:BEN)’s dividend yield on February 25 was 3.84%.
According to the Q4 database of 924 elite hedge funds maintained by Insider Monkey, 29 funds held long positions in Franklin Resources, Inc. (NYSE:BEN), with combined stakes equaling $401.1 million. Citadel Investment Group held the biggest stake in Franklin Resources, Inc. (NYSE:BEN), with 3.2 million shares worth $109.4 million.
6. Aflac Incorporated (NYSE:AFL)
Number of Hedge Fund Holders: 31
Dividend Yield as of February 25: 2.58%
Number of Years of Consecutive Dividend Increases: 40
P/E Ratio: 9.69
Aflac Incorporated (NYSE:AFL) is a Georgia-based company that offers supplemental health and life insurance products. Aflac Incorporated (NYSE:AFL) has raised its dividend payouts for 40 years in a row.
Aflac Incorporated (NYSE:AFL) announced on February 2 a $0.40 per share quarterly dividend, in line with previous. The dividend is payable on March 1, to shareholders of record on February 16. The company delivers a 2.58% yield as of February 25.
Publishing its Q4 results on February 2, Aflac Incorporated (NYSE:AFL) reported earnings per share of $1.33, outperforming estimates by $0.07. Revenue for the period came in at $5.43 billion, surpassing market consensus by $193.09 million.
Raymond James analyst C. Gregory Peters raised the price target on Aflac Incorporated (NYSE:AFL) on February 7 to $67 from $60 and kept an Outperform rating on the shares. The stock is up 11% on a year-to-date basis due in part to the expectation of higher interest rates and the positive impact on future NII growth, and going forward, a slow but gradual recovery of new sales in Japan and the United States is expected, the analyst told investors in a research note.
John W. Rogers’ Ariel Investments is the largest Aflac Incorporated (NYSE:AFL) stakeholder, with 1.5 million shares worth roughly $90 million. Overall, 31 hedge funds were bullish on the stock in the fourth quarter of 2021.
Aflac Incorporated (NYSE:AFL) is an undervalued dividend play, just like Walgreens Boots Alliance, Inc. (NASDAQ:WBA), Chevron Corporation (NYSE:CVX), and Exxon Mobil Corporation (NYSE:XOM).
Here is what Madison Funds has to say about Aflac Incorporated (NYSE:AFL) in its Q2 2021 investor letter:
“This quarter we are highlighting Aflac (AFL) as a relative yield example in the Financial sector. AFL is a leading provider of life and supplemental medical insurance in Japan and the U.S. AFL products offer financial protection against loss of income for policyholders based on qualifying health events. Aflac Japan generates approximately 70% of total revenues, and the company has dominant market share in Japan. In the U.S., AFL provides voluntary insurance for policyholders at businesses with products sold through payroll deduction by its large sales force which sells primarily through face-to-face interactions. We believe AFL’s dominant market position in Japan and its large U.S. sales force create a sustainable competitive advantage for the company.
Our thesis on AFL is that its sales will recover from the impact of the COVID pandemic, and it will return a significant amount of capital to shareholders. Sales were negatively impacted in both Japan and the U.S. but appear to be in early stages of recovering. We believe sales will improve further as economies open and new products are introduced in Japan. In the U.S., agents will be able to return to face-to-face interactions as people get vaccinated, something that was restricted last year. (Click to read full text)
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Disclosure: None. 10 Undervalued Dividend Aristocrats to Buy in 2022 is originally published on Insider Monkey.
