Stocks to buy

The 7 Most Undervalued Dividend Aristocrats to Buy

If there’s anything better than having at least some exposure to passive income-providing enterprises, it’s loading the boat on the most undervalued dividend aristocrats to buy. Per Investopedia, “[d]ividend aristocrats are stocks of companies that have raised their dividends for at least 25 consecutive years.” Several of these enterprises have raised them for far longer, providing confidence for investors.

Fundamentally, the most undervalued dividend aristocrats may come in hand this year due to lingering uncertainties. While speculation about a gradual return to normal lift equities for the year so far, questions started to pop up. In particular, a robust labor market implies that the Federal Reserve may still need to raise rates significantly.

Plus, we have geopolitical tensions rising throughout the world, sending jitters into the financial system. While the most undervalued dividend aristocrats don’t provide perfect mitigation, they offer significant insulation. Below are seven ideas with analyst support to consider.

AFL Aflac $71.01
DOV Dover $155.70
ABBV AbbVie $153.73
PNR Pentair $56.54
GD General Dynamics $232.88
EMR Emerson Electric $86.91
ADM Archer Daniels Midland $81.90

Aflac (AFL)

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An American insurance company, Aflac (NYSE:AFL) specializes in supplemental insurance. In fact, per its public profile, it’s the largest such provider in the nation. Because of its all-around relevance, AFL performed well. In the trailing year, shares gained 7% of equity value.

At the moment, Aflac carries a forward yield of 2.4%. To be sure, it’s not the greatest amount among undervalued dividend stocks to buy. For instance, the underlying financial sector’s average yield stands at 3.18%. However, the company commands an impressive 40 years of consecutive dividend increases. Plus, its payout ratio sits at 27.78%, providing confidence regarding sustainability.

Objectively, the market prices AFL at a trailing multiple of 10.64. As a discount to earnings, Aflac ranks better than 57% of its peers. Also, the company enjoys a strong net margin of 21.69%, adding to its overall appeal.

Finally, Wall Street analysts peg AFL as a consensus moderate buy. Their average price target pings at $72.11, implying over 3% upside potential. Thus, it makes for a solid candidate for most undervalued dividend aristocrats to buy.

Dover (DOV)

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Based in Illinois, Dover (NYSE:DOV) is a conglomerate manufacturer of industrial products. So far this year, DOV delighted stakeholders. Since the January opener, shares popped up over 13%. However, it still has some work to do. In the trailing year, DOV gave up more than 4% of equity value.

Be that as it may, DOV makes for an interesting case for undervalued dividend aristocrats, particularly for investors that don’t want to rock the boat. Currently, Dover carries a forward yield of 1.32%, admittedly a low rate of passive income. The industrial sector’s average yield stands at 2.36%. However, Dover commands 67 years of consecutive dividend increases. Furthermore, its payout ratio is subterranean at 20.61%.

According to data from Gurufocus.com, the market prices DOV at a trailing multiple of 20.63. As a discount to earnings, Dover ranks better than 51.47% of its competitors. Moreover, the company features above-average stats for revenue growth and net margin. Lastly, Wall Street analysts peg DOV as a consensus moderate buy. Their average price target stands at $158.92, implying 3.7% upside potential.

AbbVie (ABBV)

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One of the largest biopharmaceutical companies, AbbVie (NYSE:ABBV) generally performed well during the post-coronavirus pandemic new normal. In the trailing year, ABBV gained 7% of equity value (though the price action was choppy). Further, in the trailing five years, shares gained 28%. However, since the January opener, ABBV slipped more than 6%.

Still, investors might consider the red ink as an opportunity among undervalued dividend aristocrats. Presently, AbbVie offers a forward yield of 3.89%. Conspicuosly, this ranks much higher than the healthcare sector’s average yield of 1.58%. Further, AbbVie enjoys 51 years of consecutive dividend increases. To note, AbbVie spun off from Abbott Laboratories (NYSE:ABT) in 2013.

Objectively, the market prices ABBV at a trailing multiple of 20.3. As a discount to earnings, AbbVie ranks better than 53.54% of the competition. Also, ABBV trades hands at 12.41-times forward earnings, coming in below the sector median of 15.27 times.

Right now, analysts peg AbbVie as a consensus moderate buy. Moreover, their average price target stands at $163.50, implying 7.53% upside potential. Thus, it’s well worth consideration for undervalued dividend aristocrats to buy.

Pentair (PNR)

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A water treatment company, Pentair (NYSE:PNR) might not be one of the most well-known examples of undervalued dividend aristocrats. However, its relevance has served the company well recently. In the last six months, PNR gained over 11% of equity value. And since the January opener, shares moved up more than 22%.

Like some of the more conservative plays among undervalued dividend aristocrats, Pentair represents a don’t-rock-the-boat type of investment. Presently, its forward yield pings at 1.59%. That’s noticeably lower than the industrial sector’s average yield of 2.36%. However, Pentair commands 48 years of consecutive dividend increases. Moreover, its payout ratio sits at 21.9%, a very sustainable metric.

Financially, the market prices PNR at a trailing multiple of 19.1. As a discount to earnings, Pentair ranks better than 54.12% of its peers. Also, PNR trades hands at 15.5-times forward earnings, below the sector median of 18.87 times. Turning to Wall Street, covering analysts peg Pentair as a consensus moderate buy. In addition, their average price target stands at $60.50, implying almost 10% upside potential.

General Dynamics (GD)

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Headquartered in Reston, Virginia, General Dynamics (NYSE:GD) is an aerospace and defense corporation. As of 2020, the company represented the fifth-largest defense contractor in the world by arms sales. Cynically speaking, relevancies associated with geopolitical flashpoints helped boost GD in 2022 while other securities struggled. However, GD dipped over 6% in the year thus far.

Nevertheless, contrarians might view this as an opportunity to pick up undervalued dividend aristocrats. Currently, General Dynamics offers a forward yield of 2.16%. This stat just slips below the industrial sector’s average yield. Interestingly, GD represents a relatively new entry among the dividend aristocrats, featuring 26 years of consecutive dividend increases. Still, this circumstance implies that management won’t be too quick to give up this hard-earned status.

Objectively, the market prices GD at a trailing multiple of 19.12. As a discount to earnings, General Dynamics ranks better than 70.93% of its rivals. Also, GD trades at 18.38-times forward earnings, below the sector median of 20.79 times. Finally, covering analysts peg the defense contractor as a consensus moderate buy. Further, their average price target stands at $272.50, implying nearly 17% upside potential.

Emerson Electric (EMR)

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Based in Missouri, Emerson Electric (NYSE:EMR) is a multinational corporation that manufactures products and provides engineering services for industrial, commercial and consumer markets. To be sure, recent developments haven’t been kind to Emerson. In the trailing year, EMR gave up more than 9% of equity value. Since the Jan. opener, shares slipped nearly 11%.

Still, for contrarians, EMR could rank among the undervalued dividend aristocrats to buy. Presently, Emerson carries a forward yield of 2.42%. In this case, the yield just pips the underlying sector’s average value. Impressively, the company commands 66 years of consecutive dividend increases. Further, its payout ratio is manageable at 45.73%.

At time of writing, the market prices EMR at a trailing multiple of 10.89. As a discount to earnings, Emerson ranks better than 76.67% of its sector peers. Other than that, the company enjoys a strong profitability metrics. Lastly, Wall Street analysts peg EMR as a consensus moderate buy. Further, their average price target stands at $103.53, implying upside potential of almost 21%.

Archer Daniels Midland (ADM)

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Headquartered in Chicago, Illinois, Archer Daniels Midland (NYSE:ADM) is a multinational food processing and commodities trading corporation. Thanks to its unparalleled relevance, ADM performed well in 2022. During the trailing year, ADM gained over 7% of equity value. And in the past five years, shares almost doubled. That said, this year saw ADM slip over 8% so far.

Nevertheless, it’s easy to imagine astute investors targeting ADM as one of the undervalued dividend aristocrats to buy. Currently, the company offers a forward yield of 2.19%. That’s a bit higher than the consumer staple sector’s average yield of 1.89%. Moreover, the company features 51 years of consecutive dividend increases and a payout ratio of 26.74%.

Right now, the market prices ADM at a trailing multiple of 10.65. As a discount to earnings, ADM ranks better than 72.67% of its rivals. Also, shares trade hands at 12.14-times forward earnings, below the sector median of 16.25 times. Finally, Wall Street analysts peg ADM as a consensus strong buy. Their average price target stands at $104.20, implying upside potential of 27%.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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