In this article, we discuss 30 undervalued dividend aristocrats to buy according to analysts. You can skip our detailed analysis of dividend aristocrats and their performance over the years, and go directly to read 10 Undervalued Dividend Aristocrats To Buy According to Analysts.
Investors often grapple with the decision of whether to invest in growth stocks or value stocks. While both strategies aim to enhance value for investors, they follow distinct paths. The primary distinction lies in the pricing. Growth stocks tend to be pricier, with high valuations relative to their sales or earnings. Conversely, value stocks are more affordable, with lower stock prices in comparison to their sales or earnings. Over time, both growth and value investment approaches have demonstrated comparable performance, yet historical analysis indicates that value investing has been more advantageous for investors in the long term. According to research published by Josef Lakonishok, Andrei Shleifer, and Robert W. Vishny in the Journal of Finance, value strategies tend to yield superior returns. Various investment strategies centered around purchasing undervalued stocks have consistently outperformed those focused on trendy or high-flying stocks from April 1968 to April 1990.
The research paper also emphasized that value stocks typically offer significantly higher dividend yields and possess stronger fundamental ratios compared to growth stocks. Both Josef Lakonishok and the value investing expert David Dreman have observed that value investing outperforms growth investing approximately 70% of the time, regardless of the size of the companies involved. Their studies, which encompassed various company sizes, revealed that value stocks consistently delivered average returns of slightly over 7% per year higher than growth stocks over extended periods.
As mentioned earlier, dividends are often a key component of value stocks. Among dividend strategies, one of the most popular approaches is investing in dividend aristocrats. The S&P 500 Dividend Aristocrats index tracks the performance of companies within the S&P 500 that have consistently increased their dividends for at least 25 consecutive years. A report from S&P Dow Jones Indices indicated that strategies focusing on generating income often exhibit significant value characteristics. Investors typically gravitate towards securities offering high dividend yields and lower price multiples. The report also mentioned that the S&P 500 Dividend Aristocrats index demonstrated a blend of both growth and value traits, rather than a pronounced bias towards one style. Analysis of the index composition from 1999 to 2022 revealed its style breakdown. On average, the index maintained a 59.04% exposure to value stocks and a 40.94% exposure to growth stocks during this period.
Despite the allure of high-priced growth stocks, value stocks have consistently proven to be advantageous for investors over the long haul. Dimensional Funds conducted an analysis spanning nearly a century, affirming that value stocks typically offer higher expected returns. While there have been occasional downturns, the fundamental principle that lower relative prices correlate with higher expected returns remains steadfast. Value premiums have often manifested swiftly and significantly. For instance, in years when value outperformed growth, the average premium amounted to nearly 15%. On average, in the US, value stocks have outperformed growth stocks by 4.4% annually from 1927 to 2022.
Walmart Inc. (NYSE:WMT), Emerson Electric Co. (NYSE:EMR), and Abbott Laboratories (NYSE:ABT) are some of the best dividend aristocrat stocks that are grabbing investors’ attention. In this article, we will discuss undervalued dividend stocks.
Photo by nick chong on Unsplash
Our Methodology:
For our list, we first scanned the S&P 500 Dividend Aristocrats group of stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we identified 30 stocks with price-to-earnings (P/E) ratios of under 35, as of March 16. A low P/E ratio typically indicates that the company’s stock price is relatively low compared to its earnings per share (EPS). We then ranked these stocks according to their average analyst ratings from Yahoo Finance, where a lower score signifies a better rating. The “Recommendation Rating” is a way to assess stocks. It uses a scale from 1 to 5, with each number indicating a different recommendation:
- Strong Buy
- Buy
- Hold
- Underperform
- Sell
From this ranking, we selected the stocks with scores of 2.5 or less.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 943 funds as of Q4 2023. The stocks are ranked in ascending order of their dividend yields, as recorded on March 12. 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).
30. W.W. Grainger, Inc. (NYSE:GWW)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 26.4
W.W. Grainger, Inc. (NYSE:GWW) serves as a one-stop destination for businesses seeking supply chain solutions, technical support, and safety solutions to support their day-to-day operations and maintenance needs. The company offers a quarterly dividend of $1.86 per share and has a dividend yield of 0.74%, as of March 16. It is one of the best dividend aristocrat stocks on our list as the company holds a 51-year track record of consistent dividend growth.
At the end of December 2023, 35 hedge funds owned stakes in W.W. Grainger, Inc. (NYSE:GWW), up from 32 in the previous quarter, according to Insider Monkey’s database. The total worth of these stakes is more than $475.6 million.
29. Atmos Energy Corporation (NYSE:ATO)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 18.3
Atmos Energy Corporation (NYSE:ATO) is a Texas-based utility company that is primarily engaged in the distribution of natural gas to residential, commercial, industrial, and municipal customers across its service territories. The company has raised its dividends for 39 years in a row and offers a quarterly dividend of $0.805 per share. The stock’s dividend yield on March 16 came in at 2.79%.
The number of hedge funds tracked by Insider Monkey owning stakes in Atmos Energy Corporation (NYSE:ATO) grew to 21 in Q4 2023, from 17 in the previous quarter. The consolidated value of these stakes is over $226.7 million.
28. International Business Machines Corporation (NYSE:IBM)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 23.5
International Business Machines Corporation (NYSE:IBM) is an American multinational tech company that provides a wide range of hardware, software, and services. On January 30, the company declared a quarterly dividend of $1.30 per share, which was in line with its previous dividend. Overall, it has been growing its dividends for the past 28 consecutive years, which makes IBM one of the best dividend aristocrat stocks on our list. The stock’s dividend yield on March 16 came in at 3.48%.
At the end of Q4 2023, 53 hedge funds tracked by Insider Monkey held stakes in International Business Machines Corporation (NYSE:IBM), up from 51 in the previous quarter. These stakes have a total value of nearly $843 million.
27. Nordson Corporation (NASDAQ:NDSN)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 30.9
Nordson Corporation (NASDAQ:NDSN) is a global manufacturer of precision dispensing equipment, industrial coatings, and related technology. Currently, the company offers a quarterly dividend of $0.68 per share and has a dividend yield of 1.03%, as of March 16. It is one of the best dividend aristocrat stocks on our list as the company has raised its payouts for 60 years in a row.
Insider Monkey’s database of Q4 2023 indicated that 19 hedge funds owned stakes in Nordson Corporation (NASDAQ:NDSN) in Q4, down from 21 in the preceding quarter. These stakes have a total value of over $107.5 million. Balyasny Asset Management owned a stake worth over $25.3 million in the company, becoming its largest stakeholder in Q4.
26. Nucor Corporation (NYSE:NUE)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 10.38
Nucor Corporation (NYSE:NUE) is a North Carolina-based steel production company that operates steel mills and production facilities that manufacture a wide range of related products. The company offers a quarterly dividend of $0.54 per share, having raised it by 5.9% in December 2023. This marked the company’s 51st consecutive annual dividend hike, which makes NUE one of the best dividend aristocrat stocks on our list. The stock’s dividend yield on March 16 came in at 1.15%.
The number of hedge funds tracked by Insider Monkey owning stakes in Nucor Corporation (NYSE:NUE) jumped to 40 in Q4 2023, from 33 in the previous quarter. The total value of these stakes is more than $522.2 million.
25. Genuine Parts Company (NYSE:GPC)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 16.55
Genuine Parts Company (NYSE:GPC) is a Georgia-based company that serves customers across multiple industries, providing them with essential products, supplies, and solutions to support their operations and maintenance needs. The company remained committed to its shareholder return in FY23, returning nearly $788 million to investors through dividends. Moreover, it has been raising its dividend payouts for 68 consecutive years. The company currently offers a quarterly dividend of $1.00 per share and has a dividend yield of 2.60%, as of March 16.
According to Insider Monkey’s database of Q4 2023, 36 hedge funds owned investments in Genuine Parts Company (NYSE:GPC), up from 34 in the previous quarter. These stakes are collectively valued at over $535 million. With more than 1 million shares, D E Shaw was the company’s leading stakeholder in Q4.
24. Cincinnati Financial Corporation (NASDAQ:CINF)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 10.31
An American insurance company, Cincinnati Financial Corporation (NASDAQ:CINF) is next on our list of the best dividend aristocrat stocks. As of March 16, the stock is trading at a P/E multiple of 10.31x. The company is a Dividend King with 63 consecutive years of dividend growth under its belt. It pays a quarterly dividend of $0.81 per share for a dividend yield of 2.70%, as of March 16.
At the end of December 2023, 33 hedge funds, up from 31 in the previous quarter, held stakes in Cincinnati Financial Corporation (NASDAQ:CINF), according to Insider Monkey’s database. These stakes have a collective value of nearly $701 million.
23. Caterpillar Inc. (NYSE:CAT)
Average Analyst Rating Score: 2.5
P/E Ratio as of March 16: 17.13
Caterpillar Inc. (NYSE:CAT) is an American multinational corporation that designs, manufactures, markets and sells machinery, engines, and related products and services. The company’s quarterly dividend comes in at $1.30 per share for a dividend yield of 1.50%, as recorded on March 16. Its cash position remained strong in FY23, as it returned $7.5 billion to shareholders through dividends and share repurchases through the year. Moreover, it has raised its dividends for 29 years in a row, which makes it one of the best dividend aristocrat stocks on our list.
Caterpillar Inc. (NYSE:CAT) was a part of 48 hedge fund portfolios at the end of Q4 2023, compared with 50 in the previous quarter, according to Insider Monkey’s database. The stakes owned by these hedge funds have a total value of over $5.46 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q4.
22. Johnson & Johnson (NYSE:JNJ)
Average Analyst Rating Score: 2.4
P/E Ratio as of March 16: 30.3
Johnson & Johnson (NYSE:JNJ) is a multinational corporation that operates in the healthcare industry. The company offers a quarterly dividend of $1.19 per share and has been rewarding shareholders with growing dividends for the past 61 years. As of March 16, the stock has a dividend yield of 3.01%. With a P/E ratio of 30.3, JNJ is one of the best undervalued dividend aristocrat stocks on our list.
Of the 933 hedge funds tracked by Insider Monkey at the end of Q4 2023, 81 funds invested in Johnson & Johnson (NYSE:JNJ), compared with 84 in the previous quarter. These stakes have a collective value of roughly $4 billion.
21. PPG Industries, Inc. (NYSE:PPG)
Average Analyst Rating Score: 2.4
P/E Ratio as of March 16: 25.8
PPG Industries, Inc. (NYSE:PPG) is a Pennsylvania-based global supplier of paints, coatings, specialty materials, and related products. The company has a 125-year run of paying regular dividends to shareholders and it also maintains a 51-year streak of consistent dividend growth, which makes PPG one of the best dividend aristocrat stocks on our list. It offers a quarterly dividend of $0.65 per share and the stock’s dividend yield on March 16 came in at 1.89%.
At the end of the fourth quarter of 2023, 39 hedge funds in Insider Monkey’s database reported having stakes in PPG Industries, Inc. (NYSE:PPG), worth over $1.4 billion in total. With roughly 2 million shares, Millennium Management was the company’s leading stakeholder in Q4.
20. Sysco Corporation (NYSE:SYY)
Average Analyst Rating Score: 2.4
P/E Ratio as of March 16: 19.7
Sysco Corporation (NYSE:SYY) is a multinational corporation that specializes in food distribution and related services. On February 21, the company declared a quarterly dividend of $0.51 per share, which was consistent with its previous dividend. Overall, the company has been growing its payouts for 54 consecutive years. With a dividend yield of 2.47% as of March 16, SYY is one of the best undervalued dividend aristocrat stocks on our list.
At the end of December 2023, 39 hedge funds in Insider Monkey’s database held stakes in Sysco Corporation (NYSE:SYY), which remained unchanged from the previous quarter. These stakes are worth over $937.3 million collectively.
19. Lowe’s Companies, Inc. (NYSE:LOW)
Average Analyst Rating Score: 2.4
P/E Ratio as of March 16: 18.46
Lowe’s Companies, Inc. (NYSE:LOW) is next on our list of the best dividend aristocrat stocks to buy according to analysts. The home improvement retailer’s dividend growth streak currently spans over 59 years and it pays a quarterly dividend of $1.10 per share. As of March 16, the stock has a dividend yield of 1.80%.
As per Insider Monkey’s database of Q4 2023, 68 hedge funds owned stakes in Lowe’s Companies, Inc. (NYSE:LOW), up from 63 in the previous quarter. These stakes are collectively valued at over $3.7 billion. With over 2 million shares, Soroban Capital Partners was the company’s leading stakeholder in Q4.
18. Chubb Limited (NYSE:CB)
Average Analyst Rating Score: 2.4
P/E Ratio as of March 16: 11.75
Chubb Limited (NYSE:CB) is a global insurance company that offers a wide range of property and casualty insurance products and services. The company pays a quarterly dividend of $0.86 per share and has a dividend yield of 1.34%, as of March 16. It is one of the best dividend aristocrat stocks on our list as the company holds a 31-year track record of consistent dividend growth.
As of the end of Q4 2023, 37 hedge funds in Insider Monkey’s database owned stakes in Chubb Limited (NYSE:CB), down from 43 in the previous quarter. The consolidated value of these stakes is over $942.3 million.
17. Albemarle Corporation (NYSE:ALB)
Average Analyst Rating Score: 2.3
P/E Ratio as of March 16: 8.84
Albemarle Corporation (NYSE:ALB) is a diversified specialty chemicals company with a focus on lithium, bromine, catalysts, clean technologies, and performance chemicals. On February 22, the company announced a quarterly dividend of $0.40 per share, which fell in line with its previous dividend. The company has been rewarding shareholders with growing dividends for the past 29 years. The stock has a dividend yield of 1.31%, as of March 16.
The number of hedge funds tracked by Insider Monkey owning stakes in Albemarle Corporation (NYSE:ALB) stood at 27 in Q4 2023, compared with 37 in the preceding quarter. The collective value of these stakes is more than $311 million. Among these hedge funds, Coatue Management was the company’s leading stakeholder in Q4.
16. PepsiCo, Inc. (NASDAQ:PEP)
Average Analyst Rating Score: 2.3
P/E Ratio as of March 16: 24.03
PepsiCo, Inc. (NASDAQ:PEP) is an American multinational food and beverage corporation with a diverse portfolio of brands. In February this year, the company raised its dividend for the 52nd consecutive year, which makes it one of the best undervalued dividend aristocrats. It now pays an annual dividend of $5.42 per share and has a dividend yield of 3.07%, as of March 16.
As per Insider Monkey’s database of Q4 2023, 64 hedge funds held stakes in PepsiCo, Inc. (NASDAQ:PEP), compared with 65 in the previous quarter. These stakes have a total value of more than $4.55 billion.
15. Target Corporation (NYSE:TGT)
Average Analyst Rating Score: 2.3
P/E Ratio as of March 16: 18.46
With a P/E ratio of 18.46 as of March 16, Target Corporation (NYSE:TGT) is next on our list of the best undervalued dividend aristocrats. The American retail company declared a quarterly dividend of $1.10 per share on March 10, which was in line with its previous dividend. The company has grown its dividends for 52 years in a row. As of March 16, the stock has a dividend yield of 2.68%.
Out of the 933 hedge funds tracked by Insider Monkey at the end of Q4 2023, 58 funds owned stakes in Target Corporation (NYSE:TGT), which remained unchanged from the previous quarter. The overall value of these stakes is over $1.5 billion. Ric Dillon’s Diamond Hill Capital was the company’s leading stakeholder in Q4.
14. Air Products and Chemicals, Inc. (NYSE:APD)
Average Analyst Rating Score: 2.3
P/E Ratio as of March 16: 23.3
Air Products and Chemicals, Inc. (NYSE:APD) is an American multinational corporation that specializes in industrial gases, performance materials, and related equipment and services. The company pays a quarterly dividend of $1.77 per share, growing it by 1.1% in January this year. Through this increase, it achieved its 42nd consecutive annual dividend hike, which makes APD one of the best dividend stocks on our list. The stock has a dividend yield of 2.86%, as of March 16.
As per Insider Monkey’s database of Q4 2023, 42 hedge funds held stakes in Air Products and Chemicals, Inc. (NYSE:APD), compared with 43 in the previous quarter. These stakes have a total value of over $826.3 million. Among these hedge funds, Citadel Investment Group was the company’s leading stakeholder in Q4.
13. Federal Realty Investment Trust (NYSE:FRT)
Average Analyst Rating Score: 2.2
P/E Ratio as of March 16: 34.2
An American real estate investment trust company, Federal Realty Investment Trust (NYSE:FRT) is next on our list of the best dividend aristocrat stocks. The company declared a quarterly dividend of $1.09 per share on February 13, which was in line with its previous dividend. Overall, it holds an impressive 56-year streak of dividend growth. The stock’s dividend yield on March 16 came in at 4.36%.
Federal Realty Investment Trust (NYSE:FRT) ended the fourth quarter of 2023 with 22 hedge fund positions, up from 15 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $370.8 million.
12. Pentair plc (NYSE:PNR)
Average Analyst Rating Score: 2.2
P/E Ratio as of March 16: 21.4
Pentair plc (NYSE:PNR) is a multinational company that operates in the industrial manufacturing sector, specializing in water treatment and fluid handling solutions. The company’s current quarterly dividend comes in at $0.23 per share for a dividend yield of 1.14%, as of March 16. It has been rewarding shareholders with growing dividends for the past 48 years, which makes PNR one of the best dividend aristocrat stocks on our list.
At the end of December 2023, 35 hedge funds in Insider Monkey’s database reported having stakes in Pentair plc (NYSE:PNR), compared with 36 in the previous quarter. The consolidated value of these stakes is over $1.8 billion. With roughly 10 million shares, Impax Asset Management was the company’s leading stakeholder in Q4.
11. Exxon Mobil Corporation (NYSE:XOM)
Average Analyst Rating Score: 2.2
P/E Ratio as of March 16: 12.48
Exxon Mobil Corporation (NYSE:XOM) currently pays a quarterly dividend of $0.95 per share and has been growing its dividends for the past 41 consecutive years. It is one of the best undervalued dividend aristocrat stocks on our list as its P/E ratio came in at 12.48, as of March 16. the stock offers a dividend yield of 3.38%, as recorded on March 16.
The number of hedge funds owning stakes in Exxon Mobil Corporation (NYSE:XOM) jumped to 85 in Q4 2023, from 79 in the previous quarter, as per Insider Monkey’s database. The overall value of these stakes is roughly $4.5 billion.
Click to continue reading and see 10 Undervalued Dividend Aristocrats To Buy According to Analysts.
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Disclosure. None. 30 Undervalued Dividend Aristocrats To Buy According to Analysts is originally published on Insider Monkey.