Published February 8th, 2022
This is a guest contribution from Rick Orford
As the earnings season comes to an end, investors are still on edge. Year to date, The Nasdaq is down 11.48% and the S&P S&P 500 is down 6.52%. But, you have to remember that for every trade, there’s someone who takes the position that there’s value in it, for them. And that means that for some, stocks are cheap.
In this article, I’ll cover the 5 most undervalued Dividend Aristocrats today.
If you’re a dividend growth investor, you’ve likely heard of the Dividend Aristocrats – these are 66 companies that have increased their dividend for each of the past 25 years – and they’re listed on the S&P 500. Yes, the list is filled with snoozy stocks that for the most part, you may have never heard of. And they usually won’t have the huge swings of 20% in one day, as META did last week – but, they do provide reliable dividend increases.
There’s two ways investors generally use to see whether a stock is cheap. One way is the P/E ratio – it’s the stock price divided by its earnings per share. The other way is using a technical indicator, the 200-day moving average. This indicator checks the average closing price of a stock, for each of the past 200 trading days, or almost 1 year.
Investors like the 200-day moving average as it can indicate value. While analysts like to talk about ideal P/E multiples for a given industry, the 200-day moving average tells us what the market thinks. As a result, I tend to prefer the latter.
Note: See the video below if you’d prefer to see the 5 most undervalued Dividend Aristocrats today covered in that format instead of in the written article format.
Why Do Investors Buy The Dividend Aristocrats?
Stability can be very appealing to many investors. Dividend Aristocrats have historically outperformed the broader market on average, and they tend to avoid dramatic drops in value that can occur during times of market turmoil. Furthermore, Dividend Aristocrats are ideal to sell covered calls and cash-secured puts against, as they don’t tend to move in sharp swings. This allows investors the opportunity to generate a little more yield, year after year.
5 Most Undervalued Dividend Aristocrats Today
Dividend aristocrats have a long history of paying dividends. And, this can provide investors with a steady stream of reliable income over many years, without having to start a side hustle or second job.
The following companies are leaders in their field, and offer durable competitive advantages, with dividend-friendly management that gives investors comfort knowing that if history repeats itself, the dividend is safe.
The following 5 Dividend Aristocrats are the most undervalued based on their 200-day moving average. And they are listed in order, from smallest to largest discount.
Medtronic Plc (MDT)
Medtronic was founded in 1949 as a medical equipment repair shop. They are the largest manufacturer of biomedical devices and implantable technologies in the world. Medtronic currently has four operating segments: Cardiovascular, Neuroscience, Medical-Surgical, and Diabetes. And Today, Medtronic is one of the largest healthcare companies in the world. They are a large-cap stock with a market capitalization of around ~$138 billion.
On November 23rd, 2021 Medtronic reported their second-quarter fiscal year 2022 results for the period ending October 29th, 2021. Adjusted net income was $1.792 billion or $1.32 per share, a 29.9% year-over-year increase. Medtronic offered guidance of 7%-8% revenue growth and earnings per share of $5.65 to $5.75 for the full year. And the company’s next earnings release is expected to be February 22, 2022.
Medtronic has an impressive history of dividend growth. The company has increased its dividend for 44 years in a row. But, with a current dividend yield of just 2.5%, it’s not exactly exciting. But still, it’s better than many stocks. Medtronic shares currently trade for ~$102, representing a 15.9% discount from their 200-day moving average is $121.33.
Stanley Black & Decker (SWK)
Stanley Black & Decker can trace its roots back to 1843 when Frederick Stanley started a small shop to manufacture hardware from wrought iron. In 1910, Duncan Black and Alonzo Decker began their business together and went on to obtain the world’s first patent for portable power tools.
In 2010, the two companies came together as Stanley Black & Decker in an acquisition worth $3.5 billion. Today, they have over 56,000 employees in over 60 countries and generate over $14.5 billion in annual sales.
Its main products include hand tools, power tools, and related accessories sold under popular brands that include Stanley, Black + Decker, DeWALT, CRAFTSMAN, IRWIN, Mac Tools, and Bostich.
Stanley Black & Decker has a fantastic track record of dividend payments. The company has paid dividends for 144 years and has increased its dividend each year for 54 consecutive years, making it ideal for retirement and financial freedom portfolios.
The company released its fourth quarter and 2021 year-end results on February 1, 2022. Earnings came in at $2.14 per share, beating the estimates of $2.06 per share. This compares to earnings of $3.29 per share a year ago.
The recent trading price was ~$161 and its 200 day moving average is $193. That means that against it’s 200 day moving average, the stock is trading at around a 16.7% discount.
VF Corp. (VFC)
V.F. Corporation is a Dividend Aristocrat as it has increased its dividend for 49 years in a row. The company has a recession-resistant business, and the ability to remain highly profitable even during economic downturns. This gives it the ability to continue raising its dividend each year, even when business conditions deteriorate.
V.F. Corp increases its dividend each year, including 2020 which was a very difficult year for the company, and the broader economy, due to the coronavirus pandemic. They are also a giant in the clothing industry. The company’s annual sales exceed $10 billion and has a market cap of over $24 billion.
The company pays $2.00 per share in annual dividends, representing a yield of over 3%. On Jan 28, 2022, VF Corp reported solid third-quarter fiscal 2022 results, where they beat on both top and bottom lines. And despite the tough economic environment, the company found momentum across their brands.
The last trading price of $62.81 represents a 17.4% discount from VF Corp’s 200-day moving average of $76.04.
Leggett & Platt, Inc. (LEG)
Another company you may not have heard of is Leggett & Platt, and this company is a giant in their industry. You might even use one of their products every day. Leggett & Platt designs and makes various engineered components and products worldwide. The company operates through four segments: Residential Furnishings, Commercial Products, Industrial Materials, and Specialized Products.
Leggett & Platt, Inc. currently pays an impressive 4.2% dividend yield on their common shares. Furthermore, thanks to the company’s shareholder-friendly management, and durable competitive advantages, the company has raised its dividend each of the last 49 years. One more year and they will make the coveted Dividend Kings list – a list of companies that raised their dividend 50+ consecutive years.
Leggett & Platt Inc. reported fourth-quarter earnings yesterday, on Feb 7, 2022. Revenue came in at 1.33 billion, ahead of estimates of around 1.29 billion. Further, reported EPS was 77 cents, while consensus estimates were 73 cents per share.
Year to date, the stock is down 9.3%, slightly underperforming the S&P 500 index. Their last trading price of $37.41 represents an approximate 20.2% discount over its 200-day moving average of $46.89.
T. Rowe Price Group Inc. (TROW)
T. Rowe Price was founded in 1937 by Thomas Rowe Price, Jr. Today, the company is a global investment management organization, headquartered in Baltimore, MD. The company has a market cap north of 33 billion.
T. Rowe Price provides a broad array of mutual funds, sub-advisory services, and separate account management for individual and institutional investors, retirement plans, and financial intermediaries. Most of T. Rowe Prices’ assets are invested in the stock market.
January 2022 was a difficult month for T. Rowe Price-as it was much of the broader stock market. T. Rowe Price stock is down nearly 22%, underperforming the S&P 500 during the same period.
The company ended fiscal 2021 with $1.688 trillion under management-of which a significant portion includes tech stocks. T. Rowe Price is famous for being an early-stage investor in some of the most promising start-ups. And yet, their current yield is 2.8%, impressive for a tech-heavy portfolio. Together, with the company’s dividend-friendly management, the company has raised its dividend each of the last 35 years.
On Jan 27, 2022, the company reported its 4th quarterly earnings. Adjusted EPS of $3.17 beat estimates and was 9.7% higher from a year ago.
As of today, T. Rowe Prices’ shares trade at ~$152. And considering their 200 day moving average is ~$198. That’s a whopping 23% discount over its 200-day moving average. And that makes T. Rowe Price Group the most undervalued Dividend Aristocrat today.
*Data as of Pre-market Feb 8th, 2022
Additionally, the following Sure Dividend databases contain the most reliable dividend growers in our investment universe:
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
- The Dividend Champions: Dividend stocks with 25+ years of dividend increases, including those that may not qualify as Dividend Aristocrats.
- The Dividend Achievers: dividend stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings: considered to be the ultimate dividend growth stocks, the Dividend Kings list is comprised of stocks with 50+ years of consecutive dividend increases
If you’re looking for stocks with unique dividend characteristics, consider the following Sure Dividend databases: