In this article, we discuss 10 undervalued dividend kings to buy in 2022. If you want to skip our detailed analysis of these stocks, go directly to 5 Undervalued Dividend Kings To Buy In 2022.
A dividend king is a company that has raised its dividends consecutively for at least the last 50 years. These companies have a proven track record of rewarding shareholders with consistently increasing dividends.
The S&P 500 dividend kings are concentrated in the industrials, consumer staples, and utilities sectors. The dividend kings outperformed the S&P 500 ETF (SPY) in January 2022, with the total return for dividend kings equaling -4.3%, whereas the SPY January 2022 total return was -5.3%.
In the rising rate and inflationary environment, it is important to hold a diversified portfolio that pays stable passive income to investors. Dividend stocks are a significant hedge against inflation, and investors are moving from growth to value plays in the current market. Some of the best dividend kings that also seem undervalued today include Target Corporation (NYSE:TGT), Leggett & Platt, Incorporated (NYSE:LEG), and Stanley Black & Decker, Inc. (NYSE:SWK), among others discussed in detail below.
Our Methodology
We chose dividend kings with a price to earnings ratio of below or close to 20, mentioning the dividend yields and number of years of consecutive dividend increases for each stock. We have also highlighted analyst ratings where available, and ranked the securities according to the hedge fund sentiment.
Data from around 924 elite funds tracked by Insider Monkey in Q4 2021 was used to gauge the hedge fund sentiment around the holdings.
Photo by Sharon McCutcheon on Unsplash
Undervalued Dividend Kings To Buy In 2022
10. Farmers & Merchants Bancorp (OTC:FMCB)
Dividend Yield as of February 24: 1.65%
Number of Hedge Fund Holders: 6
Number of Years of Consecutive Dividend Increases: 56
P/E Ratio: 11.11
Farmers & Merchants Bancorp (OTC:FMCB) is a California-based bank holding company that operates via Farmers & Merchants Bank of Central California, dealing in deposit instruments, including checking, savings, money market, time certificates of deposit, and individual retirement accounts.
On November 15, Farmers & Merchants Bancorp (OTC:FMCB) announced a year-end cash dividend of $7.80 per share, an increase of 4.00% year-on-year. The dividend was paid on January 3, 2022, to shareholders of record as of December 9, 2021.
In a press release on February 1, Farmers & Merchants Bancorp (OTC:FMCB) reported GAAP earnings per share for 2021 of $84.01. Revenue for the period came in at $182 million, up 10.3% year-over-year.
Among the hedge funds tracked by Insider Monkey, 6 funds were bullish on Farmers & Merchants Bancorp (OTC:FMCB) in Q4 2021, up from 3 funds a quarter prior. The total stakes held by elite funds in the fourth quarter amounted to $12.4 million. Phil Stone’s Fourthstone LLC owned the biggest stake in Farmers & Merchants Bancorp (OTC:FMCB), with 181,062 shares worth roughly $6 million.
In addition to Target Corporation (NYSE:TGT), Leggett & Platt, Incorporated (NYSE:LEG), and Stanley Black & Decker, Inc. (NYSE:SWK), Farmers & Merchants Bancorp (OTC:FMCB) is a notable undervalued dividend king to buy in 2022.
9. Northwest Natural Holding Company (NYSE:NWN)
Dividend Yield as of February 24: 4.11%
Number of Hedge Fund Holders: 7
Number of Years of Consecutive Dividend Increases: 66
P/E Ratio: 17.14
Northwest Natural Holding Company (NYSE:NWN) operates via Northwest Natural Gas Company, supplying regulated natural gas to residential, commercial, industrial, and transportation customers in Oregon and Southwest Washington. Guggenheim analyst Shahriar Pourreza upgraded Northwest Natural Holding Company (NYSE:NWN) on January 20 to Neutral from Sell with a $49 price target.
On January 13, Northwest Natural Holding Company (NYSE:NWN) declared a $0.4825 per share quarterly dividend, a 0.5% increase from its prior dividend of $0.480. The dividend was paid on February 15, to shareholders of record on January 31. As of February 24, Northwest Natural Holding Company (NYSE:NWN) delivered a yield of 4.11%, and the company has consistently increased its dividends for 66 years.
The company announced a Q4 GAAP EPS of $1.31 in a press release on February 25, exceeding consensus estimates by $0.04. Northwest Natural Holding Company (NYSE:NWN) posted a revenue of $294.09 million, up 13.0% year-on-year, outperforming market predictions by $23.97 million. The company initiated 2022 earnings guidance in the range of $2.45 to $2.65 per share versus consensus of $2.58, and increased the long-term earnings per share growth rate target of 4% to 6%.
In Q4 2021, 7 hedge funds were bullish on Northwest Natural Holding Company (NYSE:NWN), with combined stakes valued at $7.8 million. Billionaire Ken Griffin’s Citadel Investment Group held the leading stake in Northwest Natural Holding Company (NYSE:NWN), with 54,582 shares worth $2.6 million.
8. Universal Corporation (NYSE:UVV)
Dividend Yield as of February 24: 5.94%
Number of Hedge Fund Holders: 7
Number of Years of Consecutive Dividend Increases: 51
P/E Ratio: 13.06
Universal Corporation (NYSE:UVV) procures and sells leaf tobacco and plant-based ingredients to manufacturers of consumer tobacco products worldwide. Universal Corporation (NYSE:UVV) has a rich dividend history, increasing dividend payments for 51 consecutive years.
On February 2, Universal Corporation (NYSE:UVV) declared a quarterly dividend of $0.78 per share, in line with previous. The dividend is payable on May 2, to shareholders of record on April 11. Universal Corporation (NYSE:UVV)’s dividend yield equals 5.94% as of February 24.
Universal Corporation (NYSE:UVV) announced its financial results for Q4 2021 on February 2, reporting a non-GAAP EPS of $1.80. The company’s revenue over the period came in at $652.6 million.
In the fourth quarter of 2021, 7 hedge funds in the database of Insider Monkey reported owning stakes in Universal Corporation (NYSE:UVV), worth $79.3 million, as compared to 8 funds in the prior quarter, holding stakes in Universal Corporation (NYSE:UVV) valued at $75.6 million. Pzena Investment Management was the biggest shareholder of the company, with 883,485 shares worth $48.5 million.
7. Black Hills Corporation (NYSE:BKH)
Dividend Yield as of February 24: 3.50%
Number of Hedge Fund Holders: 19
Number of Years of Consecutive Dividend Increases: 51
P/E Ratio: 18.19
Headquartered in Rapid City, South Dakota, Black Hills Corporation (NYSE:BKH) is an electric and natural gas utility company. Black Hills Corporation (NYSE:BKH) also constructs and maintains gas infrastructure facilities for gas transportation customers.
Black Hills Corporation (NYSE:BKH) declared on January 26 a $0.595 per share quarterly dividend, in-line with prior. The dividend will be paid on March 1, for shareholders of record on February 14. Black Hills Corporation (NYSE:BKH)’s dividend yield on February 24 came in at 3.50%.
In its Q4 earnings report, published on February 9, Black Hills Corporation (NYSE:BKH) posted an EPS of $1.11, missing consensus estimates by $0.19. Revenue over the period increased 15.65% year-over-year to $562.50 million, exceeding estimates by $59 million.
Mizuho analyst Paul Fremont on February 7 upgraded Black Hills Corporation (NYSE:BKH) to Buy from Neutral with an unchanged price target of $71. The current valuation provides a “free option” if the company decides to pursue the transition of its business mix away from gas, while avoiding equity issuance in the process, the analyst told investors in a research note, citing valuation for the upgrade.
Adage Capital Management held the leading stake in Black Hills Corporation (NYSE:BKH) in Q4 2021, with 205,000 shares worth $14.4 million. Overall, 19 hedge funds were bullish on the stock in the fourth quarter.
Black Hills Corporation (NYSE:BKH) is an undervalued dividend king on the radar of institutional investors, just like Target Corporation (NYSE:TGT), Leggett & Platt, Incorporated (NYSE:LEG), and Stanley Black & Decker, Inc. (NYSE:SWK).
6. Leggett & Platt, Incorporated (NYSE:LEG)
Dividend Yield as of February 24: 4.65%
Number of Hedge Fund Holders: 21
Number of Years of Consecutive Dividend Increases: 50
P/E Ratio: 12.28
Leggett & Platt, Incorporated (NYSE:LEG) is an American manufacturer of bedding, furniture, flooring, and textile products, selling to big box stores, e-commerce retailers, bedding brands and mattress retailers, and home improvement centers. Raymond James analyst Bobby Griffin lowered the price target on Leggett & Platt, Incorporated (NYSE:LEG) on February 9 to $50 from $55 and kept an Outperform rating on the shares.
On February 7, Leggett & Platt, Incorporated (NYSE:LEG) posted its Q4 earnings. The company announced an EPS of $0.77, exceeding consensus estimates by $0.04. Revenue for the quarter equaled $1.33 billion, up 12.77% year-on-year, outperforming market consensus by $47.39 million.
Leggett & Platt, Incorporated (NYSE:LEG) on February 22 declared a quarterly dividend of $0.42 per share, a 5.0% increase from its prior dividend of $0.40. The dividend is payable on April 15, for shareholders of record on March 15. Leggett & Platt, Incorporated (NYSE:LEG) has paid growing dividends consistently for 50 years.
Among the hedge funds tracked by Insider Monkey in Q4 2021, 21 funds were bullish on Leggett & Platt, Incorporated (NYSE:LEG), up from 16 funds in the prior quarter. Israel Englander’s Millennium Management is the biggest shareholder of Leggett & Platt, Incorporated (NYSE:LEG), with 1.16 million shares worth $47.8 million.
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Disclosure: None. 10 Undervalued Dividend Kings To Buy In 2022 is originally published on Insider Monkey.
