In this article, we discuss 12 best dividend stocks that are undervalued and have just raised their payouts. You can skip our detailed analysis of dividend and value stocks and their previous performance, and go directly to read 5 Undervalued Stocks That Just Raised Their Dividends.
Dividend stocks didn’t perform well in 2023. However, this apparent setback has actually created favorable opportunities for long-term investors to identify undervalued stocks. Analysts also suggest piling into undervalued equities as these stocks have the potential to offer higher returns in the long run. Morningstar Chief US Market Strategist David Sekera also highlighted the same investment strategy in his second-quarter 2024 stock market outlook. Here are some comments from the analyst:
“In our view, it is unlikely that what has worked for the last year and a half will be what continues to work. We think now is a good time for investors to look for contrarian investment opportunities, especially in those areas that have underperformed, are unloved—and most importantly—undervalued.”
Undervalued stocks are those that are trading below their intrinsic value. This means that the market price of these stocks does not truly reflect their worth. Investing in undervalued dividend stocks can be a good opportunity for investors as these equities provide a steady income stream even if the stock price doesn’t immediately appreciate. In addition to this, value stocks have shown strong performance over growth stocks over time. Studies conducted by Josef Lakonishok, a former finance professor at the University of Illinois, and David Dreman, a renowned expert in value investing, have highlighted that value stocks typically offer higher dividend yields and exhibit stronger fundamental ratios compared to high-flying growth stocks, as we reported in our article 30 Undervalued Dividend Aristocrats To Buy According to Analysts. Their research indicated that value investing outpaces growth around 70% of the time, irrespective of the companies’ sizes. Across different company sizes, their analysis consistently demonstrated that value stocks yield average returns of a little over 7% per year higher than growth stocks over extended periods.
Despite the underperformance of dividend stocks in 2023, companies worldwide are steadily raising their dividend payouts as a strategy to draw investor interest. Global dividend growth has consistently shown an upward trend over the past years, especially after the pandemic of 2020. According to a report by Janus Henderson Investors, global dividends grew from $1.24 trillion in 2017 to $1.66 trillion in 2023. Moreover, the figure is expected to reach $1.72 trillion this year. The dividend outlook for European companies is also promising, as they are expected to distribute €620 billion ($667 billion) to shareholders this year, marking a decade-high level of returns, as reported by Bloomberg.
AbbVie Inc. (NYSE:ABBV), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) are some of the best dividend stocks that are grabbing investors’ attention because of their long dividend growth streaks. In this article, we will take a look at some of the best dividend stocks that are currently undervalued and have recently raised their dividends.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology:
For this list, we first scanned the list of companies that raised their dividend payouts in May 2024. From this group, we identified 30 stocks with trailing twelve months price-to-earnings (P/E) ratios of under 25, as of May 13. A low P/E ratio typically indicates that the company’s stock price is relatively low compared to its earnings per share (EPS). The stocks are ranked in descending order of their PE ratios. We also mentioned hedge fund sentiment data for these stocks using Insider Monkey’s database of 933 hedge funds as of Q4 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
12. Marriott International, Inc. (NASDAQ:MAR)
PE Ratio (TTM): 24.82
Marriott International, Inc. (NASDAQ:MAR) is an American multinational hospitality company that operates a broad portfolio of hotels, resorts, and related facilities across the world. On May 10, the company declared a 21.2% hike in its quarterly dividend to $0.63 per share. The stock has a dividend yield of 0.87%, as of May 13. Year-to-date through April 26, the company distributed $1.7 billion to shareholders through dividends, which makes MAR one of the best dividend stocks on our list.
At the end of Q4 2023, 52 hedge funds tracked by Insider Monkey owned stakes in Marriott International, Inc. (NASDAQ:MAR), up from 51 in the previous quarter. The collective value of these stakes is nearly $2.4 billion. With roughly 4.4 million shares, Fundsmith LLP was the company’s leading stakeholder in Q4.
11. Simpson Manufacturing Co., Inc. (NYSE:SSD)
PE Ratio (TTM): 22.08
Simpson Manufacturing Co., Inc. (NYSE:SSD) is a California-based adhesive manufacturing company that specializes in providing structural solutions for related industries. In the first quarter of 2024, the company reported an operating cash flow of $8.6 million, up significantly from $3 million in the same period last year. It ended the quarter with roughly $370 million available in cash and cash equivalents, compared with $252.4 million in the prior-year period.
Simpson Manufacturing Co., Inc. (NYSE:SSD), one of the best dividend stocks, announced a 3.7% growth in its quarterly dividend to $0.28 per share on May 2. This was the company’s tenth consecutive year of dividend growth. As of May 13, the stock has a dividend yield of 0.64%.
As of the close of Q4 2023, 19 hedge funds in Insider Monkey’s database owned stakes in Simpson Manufacturing Co., Inc. (NYSE:SSD), compared with 22 in the preceding quarter. The consolidated value of these stakes is roughly $266 million.
10. RLI Corp. (NYSE:RLI)
PE Ratio (TTM): 20.04
RLI Corp. (NYSE:RLI) is an American insurance company that offers services in property and casualty insurance. The company pays a quarterly dividend of $0.29 per share, growing it by 7.4% on May 2. Through this increase, the company stretched its dividend growth streak to 49 years, which makes RLI one of the best dividend stocks on our list. The stock’s dividend yield on May 13 came in at 0.78%.
According to Insider Monkey’s database of Q4 2023, 18 hedge funds held stakes in RLI Corp. (NYSE:RLI), which remained unchanged from the previous quarter. The overall value of these stakes is over $368.2 million. Among these hedge funds, Markel Gayner Asset Management was the company’s leading stakeholder in Q4.
9. International Business Machines Corporation (NYSE:IBM)
PE Ratio (TTM): 18.9
An American multinational tech company, International Business Machines Corporation (NYSE:IBM) is next on our list of the best dividend stocks. The company recently raised its quarterly dividend by 0.6% to $1.67 per share. This marked the company’s 29th consecutive year of dividend growth. The stock offers a dividend yield of 4%, as recorded on May 13.
In the first quarter of 2024, International Business Machines Corporation (NYSE:IBM) reported an operating cash flow of $4.2 billion and its free cash flow for the period came in at nearly $2 billion. During the quarter, the company returned $1.5 billion to shareholders through dividends.
Insider Monkey’s database of Q4 2023 indicated that 50 hedge funds held stakes in International Business Machines Corporation (NYSE:IBM), compared with 53 in the previous quarter. These stakes are collectively valued at nearly $2 billion.
8. The Timken Company (NYSE:TKR)
PE Ratio (TTM): 17.44
The Timken Company (NYSE:TKR) is a global manufacturing company that specializes in bearings and engineered components that are used in diverse industries. On May 3, the company declared a 3% increase in its quarterly dividend to $0.34 per share. This was the company’s 11th consecutive year of dividend growth, which makes TKR one of the best dividend stocks on our list. Moreover, the company has paid consecutive quarterly dividends to shareholders since in IPO in 1922. The stock’s dividend yield on May 13 came in at 1.48%.
The number of hedge funds tracked by Insider Monkey owning stakes in The Timken Company (NYSE:TKR) grew to 30 in Q4 2023, from 25 in the previous quarter. The consolidated value of these stakes is roughly $190 million. Cliff Asness’ AQR Capital Management was the company’s leading stakeholder in Q4.
7. Sunoco LP (NYSE:SUN)
PE Ratio (TTM): 15.08
Sunoco LP (NYSE:SUN) is a Texas-based master limited partnership (MLP) that specializes in the distribution of fuels. The company’s quarterly dividend currently comes in at $0.8756 per share, after raising it by 4% on May 3. It has been making regular dividend payments to shareholders since 2012, which makes SUN one of the best dividend stocks that just raised their dividends. The stock supports an impressive dividend yield of 7.71%, as of May 13.
Sunoco LP (NYSE:SUN) was a part of 2 hedge fund portfolios at the end of Q4 2023, which remained unchanged from the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $1.6 million.
6. Atlas Energy Solutions Inc. (NYSE:AESI)
PE Ratio (TTM): 13.29
Atlas Energy Solutions Inc. (NYSE:AESI) ranks sixth on our list of the best dividend stocks that just raised their dividends. The company offers a wide range of innovative logistics services to the oil and gas industries. The company started paying dividends in 2023 and has raised its payouts twice since then. It currently offers a quarterly dividend of $0.22 per share and has a dividend yield of 2.82%, as of May 13. On May 6, the company also announced a variable dividend of $0.06 per share.
With a collective stake value of over $43.2 million, 9 hedge funds tracked by Insider Monkey owned positions in Atlas Energy Solutions Inc. (NYSE:AESI), down from 14 in the previous quarter.
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Disclosure. None. 12 Undervalued Stocks That Just Raised Their Dividends is originally published on Insider Monkey.