In this article, we discuss 15 cheapest dividend aristocrats right now. You can skip our detailed analysis of value and dividend investing, and go directly to read 5 Cheapest Dividend Aristocrats Right Now.
On February 1, 2023, the Federal Reserve raised its benchmark interest rate by 0.25 percentage points, which marked its eighth increase since March 2022. The continuous interest rate hikes have made investors anxious about the stock market’s future. According to Bloomberg’s MLIV Pulse survey conducted in January, investors broadly gave a pessimistic view of the market. However, over half of the respondents showed an inclination toward cheaper value stocks, considering their outperformance over growth equities in 2022. In addition to this, companies that have proven track records of dividend growth also made it to investors’ choice.
Value stocks showed their greatest performance last year against growth equities since 2000, as reported by Bloomberg. Analysts expect the trend of value investing to continue this year as higher interest rates put margin pressures on the technology sector. Moreover, last year’s selloff was the worst for tech stocks since 2008, so investors are moving toward defensive quality stocks to stay afloat during this period. In this regard, dividend stocks regained their appeal, with dividend payments reaching their record high in 2022. According to a report by Wall Street Journal, the companies in the S&P 500 distributed approximately $561 billion in dividends, compared with $511.2 billion in 2021. The report also mentioned that 373 companies in the S&P 500 raised their dividend through December 15, up from 353 in 2021. These results show that companies have the sufficient cash flow to fulfill their shareholder obligation smoothly.
AbbVie Inc. (NYSE:ABBV), The Coca-Cola Company (NYSE:KO), and Becton, Dickinson and Company (NYSE:BDX) are some of the popular dividend companies that are gaining popularity among investors. These companies not only have raised their dividends for years but also have strong cash generation that promises further growth in the future. Given this, we will discuss the cheapest dividend aristocrats in this article.
Photo by Nicholas Cappello on Unsplash
Our Methodology:
The stocks mentioned below belong to the elite group of Dividend Aristocrats, the companies that have raised their dividends for 25 years or more. From that list, we shortlisted stocks that have forward P/E ratios of less than 16, which means that these stocks are trading at a discount to the market. We also measured hedge fund sentiment around each stock, according to Insider Monkey’s Q3 2022 data of 920 elite funds. The stocks are ranked in descending order of their forward P/E ratios, as of February 2.
15 Cheapest Dividend Aristocrats Right Now
15. Pentair plc (NYSE:PNR)
Forward P/E Ratio as of February 2: 15.71
Pentair plc (NYSE:PNR) is a Minnesota-based water treatment company that specializes in industrial water management and provides sustainable water solutions. In its recently announced FY22 earnings, the company reported an operating cash flow of $364 million. Its free cash flow came in at $283 million. The company generated $4.1 billion in sales in FY22. It is one of the cheapest dividend aristocrats on our list with a forward P/E ratio of 15.71.
On December 12, Pentair plc (NYSE:PNR) declared a 4.8% hike in its quarterly dividend to $0.22 per share. This was the company’s 47th consecutive year of dividend growth. Like AbbVie Inc. (NYSE:ABBV), The Coca-Cola Company (NYSE:KO), and Becton, Dickinson and Company (NYSE:BDX), PNR maintains such a long dividend growth streak. The stock’s dividend yield on February 2 came in at 1.47%.
Loop Capital raised its price target on Pentair plc (NYSE:PNR) in January to $75 with a Buy rating on the shares, highlighting the company’s guidance for 2023.
At the end of Q3 2022, 29 hedge funds tracked by Insider Monkey reported owning stakes in Pentair plc (NYSE:PNR), compared with 31 in the previous quarter. The collective value of these stakes is over $914.3 million. With nearly 14 million shares, Impax Asset Management was the company’s leading stakeholder in Q3.
14. Medtronic plc (NYSE:MDT)
Forward P/E Ratio as of February 2: 14.90
Medtronic plc (NYSE:MDT) is an American multinational medical device company that also provides healthcare services to its consumers. The stock is among the cheapest dividend aristocrats on our list with a forward price-to-earnings ratio of 14.90. It currently pays a quarterly dividend of $0.68 per share and has a dividend yield of 3.12%, as of February 2. The company maintains a 45-year streak of consistent dividend growth.
In January, Mizuho maintained a Buy rating on Medtronic plc (NYSE:MDT) with a $95 price target, ahead of the company’s Q4 earnings.
At the end of Q3 2022, 55 hedge funds in Insider Monkey’s database owned stakes in Medtronic plc (NYSE:MDT), up from 54 in the previous quarter. The collective value of these stakes is over $2.6 billion.
Artisan Partners mentioned Medtronic plc (NYSE:MDT) in its Q2 2022 investor letter. Here is what the firm has to say:
“While Medtronic plc (NYSE:MDT)’s procedure volumes recovered to pre-COVID levels, foreign exchange headwinds overshadowed underlying business value growth, and supply chain issues, including those related to China’s lockdowns, impacted the surgical innovations business. The downdraft in the market during the quarter led to a pile-on. We are being patient with our investment in Medtronic because the company continues to be a strong free cash flow generator and is attractively priced, with a FCF yield of 5% on trailing one-year numbers and a dividend yield of 3%. Medtronic is under new management that is focused on growing the company’s top line, reinvesting in R&D, returning cash to shareholders and growing operating profits. We like new management’s strategy and believe new product launches, increased surgery visits, sound M&A transactions and a shareholder returns focus, should reinvigorate the business. We added to our positions in these health care names during the quarter.”
13. Cardinal Health, Inc. (NYSE:CAH)
Forward P/E Ratio as of February 2: 14.47
Cardinal Health, Inc. (NYSE:CAH) is an American multinational healthcare services company that provides cost-effective health solutions to its patients. In January, UBS raised its price target on the stock to $91 with a Buy rating on the shares, presenting a positive stance on pharma distributors.
In fiscal Q2 2023, Cardinal Health, Inc. (NYSE:CAH) reported revenue of $51.4 billion, which showed a 13.2% growth from the same period last year. The company had over $3.6 billion available in cash and cash equivalents at the end of December 2022, and its total assets amounted to over $44.4 billion. With a forward P/E ratio of 14.47, it is one of the cheapest dividend aristocrats on our list.
Cardinal Health, Inc. (NYSE:CAH) holds a 36-year streak of consistent dividend growth. The company currently pays a quarterly dividend of $0.4957 per share and has a dividend yield of 2.59%, as of February 2.
At the end of September 2022, 45 hedge funds in Insider Monkey’s database owned stakes in Cardinal Health, Inc. (NYSE:CAH), up from 44 a quarter earlier. The stakes owned by these hedge funds have a total value of over $1.03 billion.
Ariel Investments mentioned Cardinal Health, Inc. (NYSE:CAH) in its Q3 2022 investor letter. Here is what the firm has to say:
“Additionally, distributor of pharmaceutical and medical products Cardinal Health, Inc. (NYSE:CAH) advanced in the period as leadership changes were viewed to be a positive for shares. Management provided a new profit outlook for Fiscal 2023 and announced an improvement plan for the medical segment. We are encouraged by these changes and think CAH’s underlying fundamentals and competitive advantages around preventative maintenance screenings and medication management will continue to improve. We believe valuations of health care companies like CAH that focus on cost optimization and promote technological efficiency across the supply chain will be rewarded over the long term.”
12. Lowe’s Companies, Inc. (NYSE:LOW)
Forward P/E Ratio as of February 2: 14.27
Another one of the cheapest dividend aristocrats on our list is Lowe’s Companies, Inc. (NYSE:LOW), which is an American home improvement company. It currently has a forward price-to-earnings ratio of 14.27.
Lowe’s Companies, Inc. (NYSE:LOW) currently pays a quarterly dividend of $1.05 per share for a dividend yield of 1.89%, as of February 2. The company holds one of the longest dividend growth streaks of 59 years.
In December, Credit Suisse initiated its coverage of Lowe’s Companies, Inc. (NYSE:LOW) with a Neutral rating. The firm noted the company’s recently updated long-term algorithm which would help the company in case of a possible recession.
The number of hedge funds tracked by Insider Monkey owning stakes in Lowe’s Companies, Inc. (NYSE:LOW) jumped to 61 in Q3 2022, from 53 in the previous quarter. These stakes are valued at over $5.3 billion collectively. Among these hedge funds, Pershing Square owned the largest stake in the company.
Pershing Square Holdings mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2022 investor letter. Here is what the firm has to say:
“Lowe’s Companies, Inc. (NYSE:LOW)’s is a high-quality business with significant long-term earnings growth potential underpinned by a superb management team that is successfully executing a multi-faceted business transformation. (Click here to read the full text)
11. International Business Machines Corporation (NYSE:IBM)
Forward P/E Ratio as of February 2: 14.04
International Business Machines Corporation (NYSE:IBM), often known as Big Blue, is a New York-based multinational tech company that has operations in over 175 countries. On January 31, the company declared a quarterly dividend of $1.65 per share, which fell in line with its previous dividend. The stock’s dividend yield on February 2 came in at 4.85%. IBM has rewarded shareholders with consistently growing dividends for 27 years in a row.
International Business Machines Corporation (NYSE:IBM) has a forward P/E ratio of 14.04, which places it as one of the cheapest dividend aristocrats. In FY22, the company showed solid cash generation, which was enough to fulfill its shareholder return. Its operating cash flow for the year came in at $10.4 billion and it generated over $9.3 billion in free cash flow. The company returned $6 billion to investors in dividends.
BMO Capital raised its price target on International Business Machines Corporation (NYSE:IBM) to $155 with a Market Perform rating on the shares. The firm noted the company’s solid revenue growth in its recently announced earnings.
As of the close of Q3 2022, 40 hedge funds in Insider Monkey’s database owned stakes in International Business Machines Corporation (NYSE:IBM), the same as in the previous quarter. The collective value of these stakes is over $868.7 million.
10. Aflac Incorporated (NYSE:AFL)
Forward P/E Ratio as of February 2: 13.14
Aflac Incorporated (NYSE:AFL) is a Georgia-based multinational insurance company that provides supplemental insurance to its consumers. With a forward price-to-earnings ratio of 13.14, it is among the cheapest dividend aristocrats on our list.
On February 1, Aflac Incorporated (NYSE:AFL) declared a quarterly dividend of $0.42 per share having raised it by 4.5%. Through this increase, the company stretched its dividend growth streak to 41 years. As of February 2, the stock has a dividend yield of 2.45%.
At the end of FY22, Aflac Incorporated (NYSE:AFL) had over $117.3 billion in total investments and cash. The company’s total assets amounted to over $131 billion. Its revenue for the year came in at $19.5 billion, which fell by 11.8% from the same period last year.
As of the close of Q3 2022, 34 hedge funds in Insider Monkey’s database reported owning stakes in Aflac Incorporated (NYSE:AFL), up from 32 in the previous quarter. These stakes are collectively valued at nearly $380 million. Balyasny Asset Management was the company’s largest stakeholder in Q3.
9. AbbVie Inc. (NYSE:ABBV)
Forward P/E Ratio as of February 2: 12.95
AbbVie Inc. (NYSE:ABBV) is an American biotech company that specializes in drug and treatment discovery. The company currently pays a quarterly dividend of $1.48 per share for a dividend yield of 4.09%, as of February 2. It has been raising its payouts consistently for the past 50 years. It is among the cheapest dividend aristocrats on our list with a forward P/E ratio of 12.95.
In January, JPMorgan raised its price target on AbbVie Inc. (NYSE:ABBV) to $190 with an Overweight rating on the shares. The firm sees a clear path to ‘multiple expansions’ for the company in the future.
Of the 920 hedge funds tracked by Insider Monkey, 80 funds reported owning stakes in AbbVie Inc. (NYSE:ABBV) in Q3 2022, compared with 71 in the preceding quarter. These stakes are collectively worth over $1.86 billion.
Baron Funds mentioned AbbVie Inc. (NYSE:ABBV) in its Q3 2022 investor letter. Here is what the firm has to say:
“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”
8. T. Rowe Price Group, Inc. (NASDAQ:TROW)
Forward P/E Ratio as of February 2: 12.82
T. Rowe Price Group, Inc. (NASDAQ:TROW) is a Maryland-based investment management company. At the end of December, the company had over $1.7 billion in cash and cash equivalents, compared with $1.5 billion at the end of 2021. It also returned nearly $2 billion to shareholders during the year, which shows the company’s strong cash position.
T. Rowe Price Group, Inc. (NASDAQ:TROW) currently has a forward P/E ratio of 12.82, which places it as one of the cheapest dividend aristocrats. The company maintains a 36-year streak of consistent dividend growth. Its quarterly dividend stands at $1.20 per share for a dividend yield of 3.73%, as of February 2.
As per Insider Monkey’s Q3 2022 database, 30 hedge funds owned stakes in T. Rowe Price Group, Inc. (NASDAQ:TROW), with a total value of nearly $320 million. Ken Fisher and Ken Griffin were some of the company’s leading stakeholders in Q3.
7. Archer-Daniels-Midland Company (NYSE:ADM)
Forward P/E Ratio as of February 2: 12.77
Archer-Daniels-Midland Company (NYSE:ADM) is a multinational food processing company, based in Ohio. The company ranks seventh on our list of cheapest dividend aristocrats with a forward P/E ratio of 12.77. Stifel raised its price target on the stock in January to $116 with a Buy rating on the shares and gave a positive outlook of the company’s different businesses.
Archer-Daniels-Midland Company (NYSE:ADM) pays a quarterly dividend of $0.45 per share, having raised it by 12.5% on January 26. The company has been raising its dividends consistently for the past 50 years. The stock’s dividend yield on February 2 came in at 2.19%.
As of the close of Q3 2022, 37 hedge funds tracked by Insider Monkey reported owning stakes in Archer-Daniels-Midland Company (NYSE:ADM), compared with 42 in the previous quarter. These stakes are valued collectively at nearly $600 million.
Diamond Hill Capital mentioned Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter. Here is what the firm has to say:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
6. Nucor Corporation (NYSE:NUE)
Forward P/E Ratio as of February 2: 11.47
Nucor Corporation (NYSE:NUE) is an American multinational steel manufacturing company. In December 2022, the company raised its dividend for the 50th consecutive year, which takes its quarterly dividend to $0.51 per share. The stock has a dividend yield of 1.15%, as of February 2. The company can be added to dividend portfolios alongside AbbVie Inc. (NYSE:ABBV), The Coca-Cola Company (NYSE:KO), and Becton, Dickinson and Company (NYSE:BDX).
In FY22, Nucor Corporation (NYSE:NUE) remained strongly committed to its shareholder return as it paid over $3.3 billion to investors in dividends and share repurchases. With a forward P/E ratio of 11.47, the company is among the cheapest dividend aristocrats on our list.
In January, BofA initiated its coverage on Nucor Corporation (NYSE:NUE) with a Buy rating and a $172 price target, presenting a broader view of the steel industry.
Nucor Corporation (NYSE:NUE) was a popular stock among hedge funds in the third quarter of 2022, as 41 funds tracked by Insider Monkey reported owning stakes in the company, compared with 32 in the previous quarter. The collective value of these stakes is roughly $403 million.
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Disclosure. None. 15 Cheapest Dividend Aristocrats Right Now is originally published on Insider Monkey.