In this article, we discuss 5 undervalued dividend aristocrats to buy in 2022. If you want our detailed analysis of these stocks, go directly to 10 Undervalued Dividend Aristocrats to Buy in 2022.
5. Chubb Limited (NYSE:CB)
Number of Hedge Fund Holders: 34
Dividend Yield as of February 25: 1.55%
Number of Years of Consecutive Dividend Increases: 29
P/E Ratio: 10.74
Chubb Limited (NYSE:CB) is headquartered in Zurich, Switzerland, providing insurance and reinsurance products to customers worldwide. Chubb Limited (NYSE:CB) is a notable undervalued dividend aristocrat to buy in 2022, offering a price to earnings ratio of 10.74 and 29 consecutive years of dividend increases.
Chubb Limited (NYSE:CB) posted its Q4 results on February 1, announcing earnings per share of $3.81, outperforming estimates by $0.53. The $8.52 billion revenue also surpassed consensus estimates by $5.86 million.
On February 24, Chubb (NYSE:CB) declared a $0.80 per share quarterly dividend, in line with previous. The dividend is payable on April 8, to shareholders of record on March 18. Chubb Limited (NYSE:CB) offers a dividend yield of 1.55% as of February 25.
Argus analyst Kevin Heal raised the price target on Chubb Limited (NYSE:CB) on February 10 to $230 from $210 and kept a Buy rating on the shares. The analyst cited the company’s Q4 earnings beat, stating that Chubb Limited (NYSE:CB) has benefited from a strong brand, an experienced management team, and a healthy balance sheet.
The fourth quarter database of Insider Monkey suggested that 34 hedge funds were bullish on Chubb Limited (NYSE:CB), up from 30 funds in the preceding quarter. Billionaire Andreas Halvorsen’s Viking Global held the leading stake in Chubb Limited (NYSE:CB), with 3.6 million shares worth $713.6 million.
Here is what Davis Funds has to say about Chubb Limited (NYSE:CB) in their Q4 2020 investor letter:
“Chubb is now among the Fund’s largest P&C holdings at 5.2% and illustrates well why we thought there was an opportunity to add to our P&C names. Through September 30, 2020, Chubb had returned −24% for the year, reflecting investors’ fears that (1) the insurance industry would be compelled to cover substantial business interruption claims that were never intended as part of insured’s policies, (2) declining long-term rates would diminish the value of “float” (i.e., customers’ funds that insurers get to hold and invest until claims are paid), and (3) adverse trends (pre-dating the pandemic) in insured loss rates (e.g., rising litigation and settlement costs, increased frequency and severity of catastrophe losses, etc.).
With industry economics already soft, it was only a matter of time before insurance pricing would have to adjust. In fact, P&C pricing had already begun to increase in a number of business lines before COVID hit, and that trend has only increased and broadened since then. Chubb disclosed in Q3 2020 that North American commercial P&C pricing increased by more than 15% in aggregate. Some of the price increase will go to cover rising insurance loss rates, but we certainly do anticipate some dropping into underwriting profit too. Admittedly, some of that increased underwriting profit will itself get offset by a decline in investment income owing to lower interest rates, but that is a “feature,” if you will, of P&C insurance companies. Unlike a bank, where the floor on its deposit funding costs practically speaking is zero, there is in theory no reason underwriting profit cannot increase to offset low interest rates, so it is feasible for its earnings to “normalize” far in advance of an eventual rise in long-term rates. (Click here to read full text)
4. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 42
Dividend Yield as of February 25: 4.13%
Number of Years of Consecutive Dividend Increases: 46
P/E Ratio: 6.23
Founded in 1901 and based in Deerfield, Illinois, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) operates as a pharmacy, healthcare, and beauty retail company. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)’s dividend yield on February 25 was 4.13%, and it is one of the most undervalued dividend aristocrats to buy in 2022.
On January 27, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) announced a per share quarterly dividend of $0.4775, in line with previous. The dividend is payable on March 11, to shareholders of record on February 18.
In its Q4 earnings report, published on February 6, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) posted an EPS of $1.68, topping market consensus by $0.34. The company’s revenue came in at $33.90 billion, surpassing analysts’ estimates by $946.75 million.
Mizuho analyst Ann Hynes raised the price target on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) on January 10 to $56 from $51 and kept a Neutral rating on the shares, citing an improved outlook of COVID testing and vaccine benefits for the revised target.
Camber Capital Management held the leading stake in Walgreens Boots Alliance, Inc. (NASDAQ:WBA), owning 3.5 million shares worth $182.56 million. Overall, 42 hedge funds were long Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in Q4 2021, up from 37 funds in the prior quarter.
Here is what Miller Howard Investments has to say about Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q3 2021 investor letter:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We took a position in Walgreens (WBA) based on its low valuation, high dividend yield, and stable business model.”
3. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 53
Dividend Yield as of February 25: 2.37%
Number of Years of Consecutive Dividend Increases: 28
P/E Ratio: 15.90
Caterpillar Inc. (NYSE:CAT) manufactures construction and mining equipment, engines, and industrial gas turbines, serving customers worldwide.
On February 3, Tigress Financial analyst Ivan Feinseth raised the price target on Caterpillar Inc. (NYSE:CAT) to $278 from $270 and kept a Buy rating on the shares. The post-pandemic global recovery is driving increases in commodity prices and construction demand, which in turn is driving construction and mining spending and new trends in capital equipment spending that will further accelerate in 2022 and beyond, the analyst informed investors.
Caterpillar Inc. (NYSE:CAT) reported its Q4 earnings on January 28, announcing an EPS of $2.69, topping consensus estimates by $0.43. The $13.80 billion revenue was up 22.81% year-over-year, exceeding market predictions by $558.88 million.
Caterpillar (NYSE:CAT) on January 18 declared a $1.11 per share quarterly dividend, in line with the previous, which was paid on February 18. Caterpillar (NYSE:CAT)’s dividend yield on February 25 was 2.37%.
The stock is backed by Bill & Melinda Gates Foundation Trust, which held the biggest stake in the company, with 9.6 million shares worth $2 million. Overall, 53 hedge funds were bullish on the stock in the fourth quarter of 2021.
Here is what Oakmark Funds has to say about Caterpillar Inc. (NYSE:CAT) in its Q2 2021 investor letter:
“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
2. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 53
Dividend Yield as of February 25: 4.05%
Number of Years of Consecutive Dividend Increases: 35
P/E Ratio: 17.26
Chevron Corporation (NYSE:CVX) is a multinational company supplying oil, gasoline, natural gas, and other petrochemicals. Offering successive dividend increases of 35 years, Chevron Corporation (NYSE:CVX) is a notable value play for income investors. The company outperformed market consensus for revenue in Q4 2021, which came in at $48.13 billion, exceeding estimates by $2.83 billion.
On January 26, Chevron Corporation (NYSE:CVX) announced a per share quarterly dividend of $1.42, a 6% increase from its previous dividend of $1.34. The dividend is payable on March 10, to shareholders of record on February 16. The stock yields 4.05% as of February 25.
Chevron Corporation (NYSE:CVX) was in advanced discussions to acquire Renewable Energy Group, Inc. (NASDAQ:REGI) for roughly $3 billion on February 25, or for $61.50 per share. This move is Chevron Corporation (NYSE:CVX)’s big bet on green diesel.
Cowen analyst Jason Gabelman raised the price target on Chevron Corporation (NYSE:CVX) to $140 from $133 and kept an Outperform rating on the shares on February 23. The analyst expects Chevron Corporation (NYSE:CVX)’s upcoming analyst day to deliver updated guidance and the stock remains his top pick.
53 hedge funds were bullish on Chevron Corporation (NYSE:CVX) in Q4 2021, up from 51 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the largest Chevron Corporation (NYSE:CVX) stakeholder, with 38.2 million shares worth $4.4 billion.
Here is what Goehring & Rozencwajg Associates has to say about Chevron Corporation (NYSE:CVX) in its Q3 2021 investor letter:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publicly expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 71
Dividend Yield as of February 25: 4.52%
Number of Years of Consecutive Dividend Increases: 39
P/E Ratio: 14.44
Exxon Mobil Corporation (NYSE:XOM) is a Texas-based multinational oil and gas corporation which has consistently raised its dividends for 39 years. It is also one of the most undervalued dividend aristocrats that is popular among the smart money.
On February 1, Exxon Mobil Corporation (NYSE:XOM) reported its Q4 earnings, announcing an EPS of $2.05, topping market estimates by $0.11. Revenue for the quarter increased 82.56% year-over-year to roughly $85 billion, surpassing estimates by $6.24 billion.
Exxon Mobil Corporation (NYSE:XOM) on January 26 declared a quarterly dividend of $0.88 per share, payable on March 10 to shareholders of record on February 10. Jeanine Wai, an analyst from Barclays, raised the price target on Exxon Mobil Corporation (NYSE:XOM) from $73 to $91 and kept an Overweight rating on the shares on February 9.
According to the fourth quarter database of Insider Monkey, 71 funds were long Exxon Mobil Corporation (NYSE:XOM), up from 64 funds in the previous quarter. Rajiv Jain’s GQG Partners is the biggest shareholder of the company, with 32.3 million shares worth about $2 billion.
Here is what First Eagle Investment Management has to say about Exxon Mobil Corporation (NYSE:XOM) in its Q2 2021 investor letter:
“Leading contributors in the First Eagle Global Fund this quarter included Exxon Mobil Corporation. The continued recovery in oil prices as economies reopen helped fuel another strong performance across the energy complex, including shares of Exxon Mobil. Exxon Mobil recently lost a proxy fight with an activist investor that took three of the company’s 12 board seats. While the press was focused on the investor’s concerns over Exxon Mobil’s long term energy transformation strategy, other factors fundamental to shareholder returns—like capital discipline and balance sheet management—were also at play.”
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