Top Undervalued Dividend Aristocrats To Buy Now

This is a guest post by Millionaire Mob, a blog focused on investing in dividend growth stocks and travel hacking. We have helped thousands of people with bettering their financial future through passive income and dividend investing.

When building a dividend growth portfolio, a Dividend Aristocrat should always be top of mind in an optimal dividend portfolio. Dividend Aristocrats are rarely on sale and usually command premium valuations due to their outstanding track record of operational excellence and commitment to rewarding shareholders.

There are currently over 50 Dividend Aristocrats to choose from. To be a Dividend Aristocrat, a company maintains the following characteristics:

  • The Company must be in the S&P 500
  • Meet certain minimum size and liquidity requirements
  • Have over 25 years of consecutive dividend increases

Eventually, Dividend Aristocrats will be graduated to Dividend Kings. That is when they hit at least 50 years of consecutive dividend increases. You can view the list of Dividend Kings here. At Millionaire Mob, we are focused on finding undervalued dividend growth stocks relative to the prospect of dividend growth. We call this the dGARP strategy or Dividend Growth at a Reasonable Price. We like the idea of buying high quality, stable dividend growth stocks at reasonable valuations.

An Undervalued Dividend Aristocrats to Buy Now

Here is our list of Dividend Aristocrats to buy now. These stocks are reasonable priced and have no imminent signs of a dividend cut. The future prospects for each company should allow for you to sleep well at night. Additionally, you literally get paid (through dividend income) to wait for valuations to hit a more normalized level. We’ve built the ultimate guide to building a dividend portfolio to help you invest like a pro.

#1 Dividend Aristocrat to Buy Now: Aflac (Ticker: AFL)

We’ve covered this Dividend Aristocrat before and we continue to love the prospects of investing in Aflac (Ticker: AFL). Aflac recently went for a 2:1 stock split on their shares. I love investing in stocks post-split as they typically outperform. I don’t know why since stock splits are purely cosmetic. That is not the only reason why I like this Dividend Aristocrat. We also like Aflac for the following reasons:

  • Earnings per share increased ~6.2% in 2017 to $3.45 earnings per share from $3.25 earnings per share in 2016. After adjusted for the stock split, this reflects that the stock is currently priced at an approximate 13.3x price to earnings ratio.
  • For 2018, management expects earnings per share in the range of $3.72 to $3.88 earnings per share, which reflects an increase of 7.8% and 12.5%, respectively. This would imply a forward price to earnings ratio of 12.3x to 11.8x. Not too shabby for a Dividend Aristocrat.

#2 Dividend Aristocrat to Buy Now: Medtronic (Ticker: MDT)

Medtronic is a medical device company with headquarters in Dublin, Ireland (for tax purposes that was unnecessary now that the tax bill has been implemented). However, Medtronic’s operational headquarters are in Fridley, Minnesota. Medtronic is among the world’s largest medical equipment development companies. Medtronic employs over 85,000 people and has more than 53,000 patents (talk about an economic moat).

We love Medtronic as an investment in a Dividend Aristocrat because the dividend is extremely safe with no signs of a dividend cut. In addition, in light of recent volatility in the stock market, we believe that Medtronic is very sheltered to recessionary conditions. Their products are in high demand and the pipeline looks strong. Medtronic was actually able to increase their earnings per share during the Great Recession. We also like the valuation for Medtronic:

  • The company is expected to report adjusted earnings-per-share of about $5.50 in fiscal 2018, which represents a price-to-earnings ratio of ~14.5x. This represents a valuation close to the 10-year average price to earnings ratio.

While the valuation looks fairly value, we think Medtronic has substantial room to increase earnings over the next five years.

Conclusion on Dividend Aristocrats

Dividend Aristocrats are stocks that represent the one of the best opportunities at both value and growth from a dividend perspective. They are yet to become the slower growing counterparts like the Dividend Kings. When you see a Dividend Aristocrat on sale or at fair value, you need to buy! We love investing in dividend stocks and pairing up with credit card manufactured spending, which allows us to travel the world and invest at the same time. We’re always happy to provide you an introduction to credit card manufactured spending. Try it out some time. This will allow you to save some more cash to invest in your dividend portfolio!

Author Bio: Millionaire Mob is a blog focused on everything online income including: Travel Photography, Travel Rewards, Passive Income, Dividend Growth Investing and Personal Finance advice. I hope to provide the best advice to help you learn and grow along the way. Join the mob of financial freedom experts and Escalate Your Life.

18 thoughts on “Top Undervalued Dividend Aristocrats To Buy Now

    • Hi DP,

      When I decided to go the DGI route I first looked at the dividend aristocrats list. That’s how I built up my portfolio and how AFL arrived. Totally agree that it’s a great list to check out, especially when starting down this path.

    • Hi DD,

      I’m with you on AFL. It’s one of my oldest and largest holdings with no plans to sell for the foreseeable future. It really has been one of my top long term performers. I guess we both give it four thumbs up.

    • Hi DD,

      I think both AFL and MDT have their merits and deserve a spot in any long term DGI portfolio. I just hold AFL myself and it is one of my largest holdings. Guess I need to look at MDT more closely too.

    • Hi DD,

      AFL is one of my largest holdings. Guess that speaks to what I think about the company. Long term rapid dividend growth, low payout ratios and PEs too for the most part usually equals a solid long term hold.

    • Hi SMS,

      Exposure to companies outside your home country can be a valuable addition to your portfolio. I hold Canadian, Irish, British and more foreign domiciled stocks in my portfolio.

    • Hi JW,

      No doubt AFL has tremendous Japanese exposure. That being said, the stock has performed quite well over many, many decades despite currency and other economic risks. I still plan to hold on to my AFL for the foreseeable future.

    • Hi TPS,

      Both of those stocks can be found in many DGI portfolios online. I hold AFL for many, many years and have no plans to sell it. It’s a great insurance company with a lot of business in Japan and has been raising its dividend consistently for decades.

    • Hi Stockles,

      I see MDT in quite a few DGI portfolios online. I never pulled the trigger in that company but it may be time to consider that stock too.

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