In this article, we take a look at 13 best value dividend stocks to buy.
Value stocks are stocks of companies generally considered trading below what many investors think they are worth. Because different investors could view a stock differently, what a stock is worth is subjective. Some investors might view a stock as a value stock while others might find the same stock expensive.
To find value stocks, we chose stocks that are included in the The SPDR® Portfolio S&P 500® Value ETF (SPYV).
According to the ETF, The SPDR® Portfolio S&P 500® Value ETF (SPYV) ‘seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® 500 Value Index (the “Index”).
The S&P 500 Value Index measures the performance of the large-capitalization value segment in the U.S. equity market. The Index consists of those stocks in the S&P 500 Index exhibiting the strongest value characteristics based on: (i) book value to price ratio; (ii) earnings to price ratio; and (iii) sales to price ratio. The Index is float-adjusted market capitalization weighted.’
Value stocks can decline as stocks can always trade for lower than what investors think they are worth. As a ETF, The SPDR® Portfolio S&P 500® Value ETF (SPYV) declined as a whole last year and it could decline this year if economic data doesn’t meet estimates.
Dividend stocks are stocks of companies that pay dividends. When companies have excess capital, many decide to return the excess capital through a stock buyback or by paying a dividend.
When profits change, dividends can change. In good times, many companies increase their dividend when their profits increase. In more difficult times, many companies lower their dividends or suspend them altogether.
In terms of the economy in 2022 and 2023, the U.S. economy has shown signs of being a little stronger than some expected in terms of Q4 GDP. Inflation has also shown signs of potentially peaking last year.
In terms of the effect of increased interest rates on inflation, Federal Reserve Chairman Jerome Powell said on February 1, 2023, “We can now say I think for the first time that the disinflationary process has started. We can see that and we see it really in goods prices so far.”
Nevertheless, Powell also said, “It would be very premature to declare victory, or to think that we’ve really got this.”
If economic data doesn’t meet estimates, stocks could always decline, including the best value stocks. As a result, it could be a good idea for long term investors to own a well diversified portfolio of leading stocks across many different sectors.
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Methodology
For our list of 13 Best Value Dividend Stocks to Buy, we selected value stocks from the 407 holdings of the SPDR® Portfolio S&P 500® Value ETF (SPYV) as of February 2, 2023.
We then filtered the stocks to ensure they paid dividends and that they had considerable earnings growth potential in the next ten years if they maintained their market share.
We then sorted the stocks based on the number of hedge funds in our database of 920 funds that held shares in the same stock at the end of Q3.
13 Best Value Dividend Stocks to Buy
13. BlackRock, Inc. (NYSE:BLK)
Number of Hedge Fund Holders: 46
Dividend Yield as of 2/2: 2.59%
BlackRock, Inc. (NYSE:BLK) is the world’s leading asset manager with $8.59 trillion in assets under management at the end of 2022. Considering its enormous assets under management and the growth potential of the ETF sector, BlackRock, Inc. has substantial normalized earnings power. Given its scale and brand power, BlackRock, Inc. also has considerable competitive advantages. In 2022, the company returned $4.9 billion of capital back to shareholders, with $1.9 billion in share repurchases. As of February 2, BlackRock, Inc. also had a dividend yield of 2.59%.
12. CSX Corporation (NASDAQ:CSX)
Number of Hedge Fund Holders: 61
Dividend Yield as of 2/2: 1.23%
Given it doesn’t have as dominant of scale as many other companies on our list, railroad operator CSX Corporation (NASDAQ:CSX) might be riskier than many of the other companies on our list of 13 Best Value Dividend Stocks to Buy. Nevertheless, CSX Corporation is a company operating in the oligopoly that is the railroad industry and the company has substantial pricing power as a result. CSX Corporation is also a dividend stock with a dividend yield of 1.23% as of February 2 with the company having increased its annual dividend for 18 consecutive years.
11. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 61
Dividend Yield as of 2/2: 1.90%
Lowe’s Companies, Inc. is a leading home improvement retailer that has a strong brand and sizable economies of scale. If interest rates don’t rise too much further, there’s a chance that the housing market could rebound a little faster than expected. If that happens, Lowe’s Companies, Inc. could benefit. Just how far interest rates will rise and how quickly the housing market will rebound will depend on economic data however. In the mean time, Lowe’s Companies, Inc. has a dividend yield of 1.9% as of February 2. The company’s board of directors also authorized a new $15 billion stock repurchase program in December.
10. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 68
Dividend Yield as of 2/2: 1.56%
Walmart Inc. (NYSE:WMT) is a leading retailer with a strong brand and a competitive advantage in terms of its enormous scale. Considering its earnings growth over the long term, the company has raised its annual dividend for 50 consecutive years including through multiple recessions. In terms of its dividend, Walmart Inc. has a dividend yield of 1.56% as of 2/2. Of the 920 hedge funds in our database, 68 owned shares of Walmart Inc. at the end of Q3, ranking #10 on our list of 13 Best Value Dividend Stocks to Buy.
9. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
Dividend Yield as of 2/2: 2.57%
The Procter & Gamble Company is another stock that has raised its annual dividend for many years. The leading consumer staples has, in fact, raised its annual dividend for 67 consecutive years and as a result, The Procter & Gamble Company has a dividend yield of 2.57% as of February 2. Many elite funds like the stock as 69 hedge funds in our database owned shares of the stock at the end of the third quarter.
8. Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 69
Dividend Yield as of 2/2: 2.71%
As the leading investment bank in the world, Goldman Sachs Group, Inc. (NYSE:GS) has numerous competitive advantages including having a strong brand. With its competitive advantages, Goldman Sachs Group, Inc. increased its book value per share by 6.7% in 2022 to $303.55 per share. The company also earned a return on tangible equity of 11% for the year. As of 2/2, Goldman Sachs Group, Inc. has a dividend yield of 2.71%.
7. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 70
Dividend Yield as of 2/2: 1.05%
NIKE, Inc. (NYSE:NKE) is one of the world’s leading footwear, apparel, and accessories companies with a strong brand whose stock has rallied over 10% year to date as investors anticipate that the company could potentially do better in terms of its financial results in the future. The company also has a dividend yield of 1.05% as of 2/2.
Polen Capital commented on NIKE, Inc. in a Q4 2022 investor letter,
“Adobe and NIKE, Inc. were solid performers in the quarter as some of the doom and gloom narratives around these companies have waned as they both saw strong recent business results. Nike has been dealing with weak demand in China (mostly due to rolling COVID lockdowns) but also a bloated inventory position in North American apparel as well. Supply chain issues caused delays in last year’s inventory shipments. As those were overcome, newer orders came in earlier than expected causing the spike in inventory. On its most recent earnings call, it became clear to us that this inventory spike is a temporary supply issue and narrowly focused in apparel. Demand for Nike products is strong, especially for footwear where nearly every geography grew over 30% in constant currencies in the past quarter. The company expects the inventory issue to be largely behind it in the next two to three quarters and is already seeing inventory levels decline sequentially.”
6. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 85
Dividend Yield as of 2/2: 2.73%
Johnson & Johnson is a leading healthcare conglomerate with numerous competitive advantages that has raised its annual dividend for 61 consecutive years. Given its annual dividend raises, Johnson & Johnson has a dividend yield of 2.73% as of February 2. In terms of earnings estimates, analysts expect the company to earn $10.05 per share in 2022, $10.51 per share in 2023, $10.89 per share in 2024, and $11.28 per share in 2025. 85 hedge funds in our database owned shares of Johnson & Johnson at the end of Q3, ranking the stock #6 on our list of 13 Best Value Dividend Stocks to Buy.
5. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 89
Dividend Yield as of 2/2: 2.24%
The Home Depot, Inc. (NYSE:HD) is the world’s largest home improvement retailer that has a dividend yield of 2.24% as of February 2. Given the company’s sizable operations, The Home Depot, Inc. has economies of scale and earnings power.
In addition to paying a dividend, The Home Depot, Inc.’s board of directors announced a new $15 billion share repurchase program in 2022. With 89 hedge funds in our database owning shares of The Home Depot, Inc. at the end of Q3, the stock ranks #5 on our list of 13 Best Value Dividend Stocks to Buy.
4. S&P Global Inc. (NYSE:SPGI)
Number of Hedge Fund Holders: 90
Dividend Yield as of 2/2: 0.94%
Although the company said it is on track to have finished its accelerated share repurchases at the end of 2022, S&P Global Inc. stock has nevertheless surged 14.4% year to date as the market has become more bullish on the leading ratings agency’s earnings per share growth potential. In terms of capital returns, S&P Global Inc. still has a dividend yield of 0.94% as of 2/2. In terms of earnings estimates, analysts expect S&P Global Inc. to earn $11.13 per share in 2022, $12.52 per share in 2023, and $14.54 per share in 2024.
3. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 97
Dividend Yield as of 2/2: 2.44%
Bank of America Corporation (NYSE:BAC) is one of the big four banks in the United States with substantial market share and normalized earnings power if it makes the right loans and if the economic conditions aren’t recessionary. Given it has pretty decent earnings power, Bank of America Corporation is considered a dividend stock with a dividend yield of 2.44% as of 2/2. If the economy doesn’t worsen too much, there’s potential for a dividend increase this year considering the bank’s EPS growth potential. 97 hedge funds in our database owned shares of Bank of America Corporation at the end of Q3, ranking the stock #3 on our list of 13 Best Value Dividend Stocks to Buy.
2. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
Dividend Yield as of 2/2: 2.88%
JPMorgan Chase & Co. is another leading bank with substantial market share and normalized earnings power if economic conditions don’t worsen too much. While the company halted share buybacks beginning July of last year, there is a chance of the buyback returning this year as the bank remains profitable and has substantial reserves. Just how profitable JPMorgan Chase & Co. is for 2023 will depend on economic conditions, however, and not current expectations. As of 2/2, the bank had a dividend yield of 2.88%.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 269
Dividend Yield as of 2/2: 1.03%
With 269 hedge funds in our database owning shares of the stock at the end of Q3, Microsoft Corporation (NASDAQ:MSFT) ranks #1 on our list of 13 Best Value Dividend Stocks to Buy. Although the company’s outlook for 2023 was weaker than expected due to the subdued PC market, Microsoft Corporation still has long term growth potential if it wins a decent market share of the AI market. The software giant also has substantial competitive advantages given its strong brand and scale. As of 2/2, Microsoft Corporation has a dividend yield of 1.03%.
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