“Cheap” isn’t something you’d normally associate with quality, stable, and mature dividend stocks with solid revenue streams and massive international presences. Indeed, Dividend Aristocrats - companies that have paid increasing dividends for 25 or more years and are typical powerhouses in their sector - and because of it, they usually trade at a premium.
But that’s not always the case.
Sometimes, during or after market volatility, stock prices become silly, and premium stocks dip. This gives income investors like you and me the opportunity to snag these stocks at a discount.
It’s even better when such stocks are highly rated by Wall Street analysts and are expected to move bullishly based on technical analysis - it gives you more chances of capital appreciation while enjoying stable and increasing dividends.
So, today, let’s look at the cheapest buy-rated Dividend Aristocrats to add to your long-term portfolio.
How I Came Up With The Following Stocks
I used the following filters on Barchart’s Stock Screener tool to get my list:
- Overall Opinion %: 50% or more buy rating. The Overall Opinion % filter is part of Barchart’s proprietary Opinion feature, which consolidates the results of 13 popular analytics tools throughout different periods to generate a buy, hold, or sell signal based on the interpreted results. A stock with a 50% or more buy rating indicates that a majority of the results are leaning more towards a bullish price movement in the future.
- Current Analyst Rating: 4 (Moderate Buy) to 5 (Strong Buy).
- P/E Ratio TTM: 0.01 (Very Low) to 30 (Medium). We’re looking for companies with growing earnings.
- Watchlists: Dividend Aristocrats
With these filters set, I ran the screen and got four results, arranged from lowest to highest TTM P/E:
However, upon comparing them to their respective sectors’ P/E, only two of the four results are trading below industry averages. So, I decided to remove the stock trading above its sector P/E, with the lowest signal percentage and analyst rating, which is Linde Plc.
With that out of the way, let’s discuss each company, starting with the cheapest Dividend Aristocrat worth buying:
Cardinal Health (CAH)
TTM P/E: 20.42
Healthcare Sector P/E: 24.98
Cardinal Health is a major American multinational healthcare services provider that offers a wide range of healthcare services and medical products to over 90% of U.S. hospitals and more than 5 million homebound patients. It also has operations in over 35 countries.
CAH stock currently boasts one of the strongest technical strengths across all periods, ranking it among the top 1% in the market. Wall Street analysts rate the stock a “strong buy,” giving me more reason to like the stock.
Cardinal Health pays $0.506 a share quarterly, which translates to an annual rate of $2.024 and a yield of approximately 1.23%.
Pentair Ltd (PNR)
TTM P/E: 21.62
Industrials Sector: 25.09
Pentair is a global water technology company specializing in solutions for residential, commercial, industrial, municipal, infrastructure, agricultural, and pool applications. The company operates in over 130 countries and has a strong focus on water preservation and sustainability practices.
Though arguably the weakest of all three stocks in terms of opinion strength, PNR stock nonetheless has a 100% buy rating based on its short-term indicators, suggesting strong recent momentum and favorable technical conditions.
Further positive price movement in the short term can improve medium to long-term technicals. The stock also has a consensus strong buy rating from Wall Street, indicating that analysts expect it to remain bullish over the next 12 months.
Pentair pays a $1.00 forward annual dividend, which translates to approximately a 1% yield.
Bonus: Abbott Laboratories (ABT)
TTM P/E: 27.28
Healthcare Sector: 24.98
Last on the list of cheap Dividend Aristocrats is Abbott Laboratories, one of the most diversified global healthcare companies in the world, with operations in over 160 countries. The company caters to both professionals and consumer needs; fittingly, it is one of the most recognizable brands in healthcare, medical devices, and nutritional products.
Now, as you can see, Abbott’s TTM P/E is more than 2 points higher than its sector average, which means it’s trading at a premium. Furthermore, its short-term technicals are also relatively weak, based on its 20-day moving average and Trend Seeker®.
However, its medium- and long-term technicals are still quite attractive, and given that consensus on Wall Street rates ABT stock a strong buy, I’d say it’s still a worthwhile investment, even if it's trading at a modest premium.
Abbott Laboratories pays $2.36 per share annually, which translates to an approximate 1.77% yield.
Final Thoughts
Dividend Aristocrats aren’t always cheap, but when they are, they present quality opportunities to buy income-generating stocks at a discount. And even if they’re trading at a slight premium, solid technicals and a bullish Wall Street outlook can still justify the price for long-term investors.
