In this article, we discuss 10 undervalued dividend kings to buy in 2022.
A dividend king is a company that has raised its dividends consecutively for at least the last 50 years. These companies have a proven track record of rewarding shareholders with consistently increasing dividends.
The S&P 500 dividend kings are concentrated in the industrials, consumer staples, and utilities sectors. The dividend kings outperformed the S&P 500 ETF (SPY) in January 2022, with the total return for dividend kings equaling -4.3%, whereas the SPY January 2022 total return was -5.3%.
In the rising rate and inflationary environment, it is important to hold a diversified portfolio that pays stable passive income to investors. Dividend stocks are a significant hedge against inflation, and investors are moving from growth to value plays in the current market. Some of the best dividend kings that also seem undervalued today include Target Corporation (NYSE:TGT), Leggett & Platt, Incorporated (NYSE:LEG), and Stanley Black & Decker, Inc. (NYSE:SWK), among others discussed in detail below.
Our Methodology
We chose dividend kings with a price to earnings ratio of below or close to 20, mentioning the dividend yields and number of years of consecutive dividend increases for each stock. We have also highlighted analyst ratings where available, and ranked the securities according to the hedge fund sentiment.
Data from around 924 elite funds tracked by Insider Monkey in Q4 2021 was used to gauge the hedge fund sentiment around the holdings.
Photo by Sharon McCutcheon on Unsplash
Undervalued Dividend Kings To Buy In 2022
10. Farmers & Merchants Bancorp (OTC:FMCB)
Dividend Yield as of February 24: 1.65%
Number of Hedge Fund Holders: 6
Number of Years of Consecutive Dividend Increases: 56
P/E Ratio: 11.11
Farmers & Merchants Bancorp (OTC:FMCB) is a California-based bank holding company that operates via Farmers & Merchants Bank of Central California, dealing in deposit instruments, including checking, savings, money market, time certificates of deposit, and individual retirement accounts.
On November 15, Farmers & Merchants Bancorp (OTC:FMCB) announced a year-end cash dividend of $7.80 per share, an increase of 4.00% year-on-year. The dividend was paid on January 3, 2022, to shareholders of record as of December 9, 2021.
In a press release on February 1, Farmers & Merchants Bancorp (OTC:FMCB) reported GAAP earnings per share for 2021 of $84.01. Revenue for the period came in at $182 million, up 10.3% year-over-year.
Among the hedge funds tracked by Insider Monkey, 6 funds were bullish on Farmers & Merchants Bancorp (OTC:FMCB) in Q4 2021, up from 3 funds a quarter prior. The total stakes held by elite funds in the fourth quarter amounted to $12.4 million. Phil Stone’s Fourthstone LLC owned the biggest stake in Farmers & Merchants Bancorp (OTC:FMCB), with 181,062 shares worth roughly $6 million.
In addition to Target Corporation (NYSE:TGT), Leggett & Platt, Incorporated (NYSE:LEG), and Stanley Black & Decker, Inc. (NYSE:SWK), Farmers & Merchants Bancorp (OTC:FMCB) is a notable undervalued dividend king to buy in 2022.
9. Northwest Natural Holding Company (NYSE:NWN)
Dividend Yield as of February 24: 4.11%
Number of Hedge Fund Holders: 7
Number of Years of Consecutive Dividend Increases: 66
P/E Ratio: 17.14
Northwest Natural Holding Company (NYSE:NWN) operates via Northwest Natural Gas Company, supplying regulated natural gas to residential, commercial, industrial, and transportation customers in Oregon and Southwest Washington. Guggenheim analyst Shahriar Pourreza upgraded Northwest Natural Holding Company (NYSE:NWN) on January 20 to Neutral from Sell with a $49 price target.
On January 13, Northwest Natural Holding Company (NYSE:NWN) declared a $0.4825 per share quarterly dividend, a 0.5% increase from its prior dividend of $0.480. The dividend was paid on February 15, to shareholders of record on January 31. As of February 24, Northwest Natural Holding Company (NYSE:NWN) delivered a yield of 4.11%, and the company has consistently increased its dividends for 66 years.
The company announced a Q4 GAAP EPS of $1.31 in a press release on February 25, exceeding consensus estimates by $0.04. Northwest Natural Holding Company (NYSE:NWN) posted a revenue of $294.09 million, up 13.0% year-on-year, outperforming market predictions by $23.97 million. The company initiated 2022 earnings guidance in the range of $2.45 to $2.65 per share versus consensus of $2.58, and increased the long-term earnings per share growth rate target of 4% to 6%.
In Q4 2021, 7 hedge funds were bullish on Northwest Natural Holding Company (NYSE:NWN), with combined stakes valued at $7.8 million. Billionaire Ken Griffin’s Citadel Investment Group held the leading stake in Northwest Natural Holding Company (NYSE:NWN), with 54,582 shares worth $2.6 million.
8. Universal Corporation (NYSE:UVV)
Dividend Yield as of February 24: 5.94%
Number of Hedge Fund Holders: 7
Number of Years of Consecutive Dividend Increases: 51
P/E Ratio: 13.06
Universal Corporation (NYSE:UVV) procures and sells leaf tobacco and plant-based ingredients to manufacturers of consumer tobacco products worldwide. Universal Corporation (NYSE:UVV) has a rich dividend history, increasing dividend payments for 51 consecutive years.
On February 2, Universal Corporation (NYSE:UVV) declared a quarterly dividend of $0.78 per share, in line with previous. The dividend is payable on May 2, to shareholders of record on April 11. Universal Corporation (NYSE:UVV)’s dividend yield equals 5.94% as of February 24.
Universal Corporation (NYSE:UVV) announced its financial results for Q4 2021 on February 2, reporting a non-GAAP EPS of $1.80. The company’s revenue over the period came in at $652.6 million.
In the fourth quarter of 2021, 7 hedge funds in the database of Insider Monkey reported owning stakes in Universal Corporation (NYSE:UVV), worth $79.3 million, as compared to 8 funds in the prior quarter, holding stakes in Universal Corporation (NYSE:UVV) valued at $75.6 million. Pzena Investment Management was the biggest shareholder of the company, with 883,485 shares worth $48.5 million.
7. Black Hills Corporation (NYSE:BKH)
Dividend Yield as of February 24: 3.50%
Number of Hedge Fund Holders: 19
Number of Years of Consecutive Dividend Increases: 51
P/E Ratio: 18.19
Headquartered in Rapid City, South Dakota, Black Hills Corporation (NYSE:BKH) is an electric and natural gas utility company. Black Hills Corporation (NYSE:BKH) also constructs and maintains gas infrastructure facilities for gas transportation customers.
Black Hills Corporation (NYSE:BKH) declared on January 26 a $0.595 per share quarterly dividend, in-line with prior. The dividend will be paid on March 1, for shareholders of record on February 14. Black Hills Corporation (NYSE:BKH)’s dividend yield on February 24 came in at 3.50%.
In its Q4 earnings report, published on February 9, Black Hills Corporation (NYSE:BKH) posted an EPS of $1.11, missing consensus estimates by $0.19. Revenue over the period increased 15.65% year-over-year to $562.50 million, exceeding estimates by $59 million.
Mizuho analyst Paul Fremont on February 7 upgraded Black Hills Corporation (NYSE:BKH) to Buy from Neutral with an unchanged price target of $71. The current valuation provides a “free option” if the company decides to pursue the transition of its business mix away from gas, while avoiding equity issuance in the process, the analyst told investors in a research note, citing valuation for the upgrade.
Adage Capital Management held the leading stake in Black Hills Corporation (NYSE:BKH) in Q4 2021, with 205,000 shares worth $14.4 million. Overall, 19 hedge funds were bullish on the stock in the fourth quarter.
Black Hills Corporation (NYSE:BKH) is an undervalued dividend king on the radar of institutional investors, just like Target Corporation (NYSE:TGT), Leggett & Platt, Incorporated (NYSE:LEG), and Stanley Black & Decker, Inc. (NYSE:SWK).
6. Leggett & Platt, Incorporated (NYSE:LEG)
Dividend Yield as of February 24: 4.65%
Number of Hedge Fund Holders: 21
Number of Years of Consecutive Dividend Increases: 50
P/E Ratio: 12.28
Leggett & Platt, Incorporated (NYSE:LEG) is an American manufacturer of bedding, furniture, flooring, and textile products, selling to big box stores, e-commerce retailers, bedding brands and mattress retailers, and home improvement centers. Raymond James analyst Bobby Griffin lowered the price target on Leggett & Platt, Incorporated (NYSE:LEG) on February 9 to $50 from $55 and kept an Outperform rating on the shares.
On February 7, Leggett & Platt, Incorporated (NYSE:LEG) posted its Q4 earnings. The company announced an EPS of $0.77, exceeding consensus estimates by $0.04. Revenue for the quarter equaled $1.33 billion, up 12.77% year-on-year, outperforming market consensus by $47.39 million.
Leggett & Platt, Incorporated (NYSE:LEG) on February 22 declared a quarterly dividend of $0.42 per share, a 5.0% increase from its prior dividend of $0.40. The dividend is payable on April 15, for shareholders of record on March 15. Leggett & Platt, Incorporated (NYSE:LEG) has paid growing dividends consistently for 50 years.
Among the hedge funds tracked by Insider Monkey in Q4 2021, 21 funds were bullish on Leggett & Platt, Incorporated (NYSE:LEG), up from 16 funds in the prior quarter. Israel Englander’s Millennium Management is the biggest shareholder of Leggett & Platt, Incorporated (NYSE:LEG), with 1.16 million shares worth $47.8 million.
5. National Fuel Gas Company (NYSE:NFG)
Dividend Yield as of February 24: 3.06%
Number of Hedge Fund Holders: 21
Number of Years of Consecutive Dividend Increases: 51
P/E Ratio: 13.07
National Fuel Gas Company (NYSE:NFG) operates as a diversified energy company, producing natural gas and oil in California and the Appalachian region of the United States. National Fuel Gas Company (NYSE:NFG)’s history of consistently increasing dividends dates back to 51 years.
On December 3, National Fuel Gas Company (NYSE:NFG) declared a $0.45 per share quarterly dividend, in line with previous. The dividend was distributed to shareholders on January 14. As of February 24, National Fuel Gas Company (NYSE:NFG) offers a yield of 3.06%.
National Fuel Gas Company (NYSE:NFG)’s earnings and revenue for the fourth quarter of 2021 came in above market consensus. The company posted an EPS of $1.48, and revenue for the period clocked in at $546.56 million, up approximately 26% year-over-year.
Mario Gabelli’s GAMCO Investors is the biggest shareholder of National Fuel Gas Company (NYSE:NFG) as of Q4 2021, with an $80 million stake. Overall, 21 hedge funds were bullish on the stock in the fourth quarter, up from 19 funds in the quarter earlier.
Here is what Heartland Value Fund has to say about National Fuel Gas Company (NYSE:NFG) in its Q1 2021 investor letter:
“The ho-hum Utilities sector isn’t typically a place to hunt for strong growth prospects. However, for investors willing to do their homework, opportunities do exist. Portfolio holding National Fuel Gas Company (NFG) is a prime example.
NFG is a dividend aristocrat—50 consecutive years of dividend increases. Although the business is lumped in with run-of-the-mill power companies, it is much more diverse. In addition to its utility operations, a pipeline and storage division produces almost a quarter of its profits, and the company generates nearly 40% of its bottom line from natural gas exploration and production.
Shares of NFG are trading at a mid-teens discount to their historic average based on price/book. Given the state of the energy industry over the past few years, we believe the company’s gas unit could be an overlooked source of growth. Additionally, the utility recently received regulatory approval on a natural gas pipeline expansion in Pennsylvania, which is expected to produce a windfall in free cash flow.”
4. Cincinnati Financial Corporation (NASDAQ:CINF)
Dividend Yield as of February 24: 2.31%
Number of Hedge Fund Holders: 26
Number of Years of Consecutive Dividend Increases: 61
P/E Ratio: 6.59
Headquartered in Fairfield, Ohio, Cincinnati Financial Corporation (NASDAQ:CINF) offers property casualty insurance products in the United States. The company has paid consecutively increasing dividends for 61 years, and delivers a yield of 2.31% as of February 24. It is one of the most undervalued dividend kings to buy in 2022, with a price to earnings ratio of 6.59.
Cincinnati Financial Corporation (NASDAQ:CINF) announced its fourth quarter earnings on February 15, posting an EPS of $1.97, above consensus by $0.61. Revenue for the period jumped 23.35% year-over-year to $3.32 billion, outperforming estimates by $1.55 billion. The fourth quarter results were helped by a boost in earned premiums and investment income.
On January 28, Cincinnati Financial Corporation (NASDAQ:CINF) reported a $0.69 per share quarterly dividend, a 9.5% increase from its prior dividend of $0.63. The dividend will be paid on April 15, to shareholders of record on March 18.
Select Equity Group held the biggest position in Cincinnati Financial Corporation (NASDAQ:CINF) in Q4 2021, with more than 3 million shares worth $356.8 million. Overall, 26 hedge funds held long positions in Cincinnati Financial Corporation (NASDAQ:CINF) according to the Q4 database of Insider Monkey.
3. Stanley Black & Decker, Inc. (NYSE:SWK)
Dividend Yield as of February 24: 2.02%
Number of Hedge Fund Holders: 42
Number of Years of Consecutive Dividend Increases: 54
P/E Ratio: 17.50
Stanley Black & Decker, Inc. (NYSE:SWK) is a Connecticut-based manufacturer of industrial tools, hardware, security, and medical equipment. Stanley Black & Decker, Inc. (NYSE:SWK) has raised its dividends consistently for 54 years, offering a yield of 2.02%.
On February 16, Stanley Black & Decker, Inc. (NYSE:SWK) declared a $0.79 per share quarterly dividend, in line with previous. The dividend is payable on March 22, to shareholders of record on March 8. Stanley Black & Decker, Inc. (NYSE:SWK) also beat market consensus on earnings, with an EPS of $2.14.
On February 23, Stanley Black & Decker, Inc. (NYSE:SWK) priced its offering of $500 million aggregate principal amount of 2.30% senior notes due 2025 at 99.865% of par and $500 million aggregate principal amount of 3.0% Senior Notes due 2032.
Citi analyst Eric Lau resumed coverage of Stanley Black & Decker, Inc. (NYSE:SWK) on February 3 with a Buy rating and a $215 price target after the Q4 results. Despite global supply chain constraints, the company’s end-demand remained solid, the analyst told investors in a research note.
Pzena Investment Management held the largest stake in Stanley Black & Decker, Inc. (NYSE:SWK) in Q4 2021, with over 1 million shares worth $190.7 million. Overall, 42 hedge funds were long Stanley Black & Decker, Inc. (NYSE:SWK) in the fourth quarter.
Here is what Saturna Capital Sextant Funds has to say about Stanley Black & Decker, Inc. (NYSE:SWK) in its Q3 2021 investor letter:
“Stanley Black & Decker, Inc. (NYSE:SWK) performed well through the first part of the year but struggled over the summer. China accounts for much of its production, and their zero-tolerance approach to pandemic safety measures has led to disruption, compounded by shipping difficulties and rising materials expenses. We still believe one outcome of the pandemic will be a buoyant home improvement market, given that one never knows when the next pandemic lockdown may occur.”
2. Emerson Electric Co. (NYSE:EMR)
Dividend Yield as of February 24: 2.22%
Number of Hedge Fund Holders: 43
Number of Years of Consecutive Dividend Increases: 65
P/E Ratio: 20.21
Emerson Electric Co. (NYSE:EMR) is a Missouri-based company that designs technology and engineering products for the global industrial, commercial, and consumer markets. The company serves multiple market segments including oil and gas, refining, chemicals, power generation, life sciences, automotive, and metals and mining, among others.
On February 2, Emerson Electric Co. (NYSE:EMR) declared a per share quarterly dividend of $0.515, in line with previous. The dividend is payable on March 10, for shareholders of record on February 11.
Deutsche Bank analyst Nicole DeBlase lowered the price target on Emerson Electric Co. (NYSE:EMR) on February 3 to $660 from $715 and kept a Buy rating on the shares following the company’s Q4 results. The analyst continues to like Emerson Electric Co. (NYSE:EMR)’s later-cycle end market exposures, which she says are poised to see continued recovery throughout the course of the year.
According to the Q4 database of Insider Monkey, 43 hedge funds were bullish on Emerson Electric Co. (NYSE:EMR), up from 41 funds in the prior quarter. Two Sigma Advisors was the biggest shareholder of Emerson Electric Co. (NYSE:EMR), with 2.6 million shares worth over $250 million.
1. Target Corporation (NYSE:TGT)
Dividend Yield as of February 24: 1.88%
Number of Hedge Fund Holders: 49
Number of Years of Consecutive Dividend Increases: 50
P/E Ratio: 14.10
Target Corporation (NYSE:TGT), an American big-box store company, made it to our list of the undervalued dividend kings to buy in 2022 since the company has delivered consecutive dividend increases for 50 years and offers a P/E ratio of 14.10.
On January 13, Target Corporation (NYSE:TGT) declared a $0.90 per share quarterly dividend, in line with previous. The dividend is payable on March 10, for shareholders of record on February 16.
Cowen analyst Oliver Chen lowered the price target on Target Corporation (NYSE:TGT) to $265 from $300 and kept an Outperform rating on the shares. Chen said longer-term, he believes Target Corporation (NYSE:TGT) will be better positioned to work through inflationary challenges over the coming quarters, and benefit from a more resilient consumer, balanced category mix, and broad-based market share growth. The stock trades at a modest valuation.
A total of 49 hedge funds were bullish on Target Corporation (NYSE:TGT) in Q4 2021, with collective stakes amounting to $3.9 billion. Rajiv Jain’s GQG Partners is the biggest shareholder of the company, with 4.90 million shares worth $1.13 billion.
Here is what Nelson Capital Management has to say about Target Corporation (NYSE:TGT) in its Q2 2021 investor letter:
“We added Target (tkr: TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfillment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target is an attractive holding.”
You can also take a look at 10 Best Pharmaceutical Stocks to Buy in 2022 and 10 Best Mid Cap Stocks To Buy In 2022 .
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Disclosure: None. 10 Undervalued Dividend Kings To Buy In 2022 is originally published on Insider Monkey.
