In this article, we discuss 10 undervalued dividend stocks to buy in September.
Dividend Kings are an elite group of companies that have raised their dividends for over 50 years consistently. These companies are favored by investors during financial storms because of their stable cash flows. Companies like The Coca-Cola Company (NYSE:KO), Exxon Mobil Corporation (NYSE:XOM), and Johnson & Johnson (NYSE:JNJ) are popular among investors because of their industry-leading dividend growth track records.
Considering the current economic outlook, investors are advised to pick out stocks with long-term growth prospects. In this regard, value stocks with consistent dividend payments are advised as they can provide a hedge against inflation. A value stock trades at a lower price relative to its fundamentals, like earnings and dividends. Dan Boardman-Weston, chief investment officer at BRI Wealth Management, told Bloomberg earlier this year that there will be an opportunity for value stocks this year due to strong monetary policies.
Analysts are also presenting a positive stance on dividend stocks due to their record payments in the first two quarters this year. Recently Janus Henderson upgraded its annual dividend forecasts, expecting the dividend payments to reach $1.56 trillion by the end of the year, compared with its previous forecast of $1.54 trillion. This reflects the headline growth of 5.8% year-over-year and an 8.5% increase on an underlying basis. Further evaluating these arguments, we will discuss some undervalued dividend kings to buy in September.
Photo by Vitaly Taranov on Unsplash
Our Methodology:
The dividend stocks mentioned below have P/E ratios below 20 and have been raising their dividends consistently for the past 50 years.
Best Undervalued Dividend Kings to Buy in September
10. Farmers & Merchants Bancorp, Inc. (OTCQX:FMCB)
P/E Ratio: 10.95
Founded in 1916, Farmers & Merchants Bancorp, Inc. (OTCQX:FMCB) operates 32 branches across California’s Central Valley and East Bay areas.
Farmers & Merchants Bancorp (OTCQX:FMCB) has raised its dividend consistently for the last 57 consecutive years.
The Board of Directors of Farmers & Merchants Bancorp, Inc. (FMAO), the holding company of The Farmers & Merchants State Bank, said in September that it approved a 16.7% year-over-year increase in the company’s quarterly cash dividend. The dividend is payable on October 20, 2022, to shareholders of record as of September 26, 2022.
9. National Fuel Gas Company (NYSE:NFG)
P/E Ratio: 13.03
National Fuel Gas Company (NYSE:NFG) is an American natural gas distribution company that also specializes in exploration and production. In July, Scotiabank assumed its coverage on the stock with an Outperform rating and an $89 price target, highlighting the company’s capital allocation and financial flexibility.
On June 15, National Fuel Gas Company (NYSE:NFG) raised its quarterly dividend by 4% to $0.475 per share. This marked the company’s 52nd consecutive year of dividend growth. In addition to this, the undervalued dividend king has been making dividend payments for the past 120 years. As of September 6, the stock’s dividend yield stood at 2.71%.
Though National Fuel Gas Company (NYSE:NFG) missed Street estimates on various accounts in Q2 2022, the company’s revenue of $502.6 million saw a 27.4% year-over-year growth. The company’s cash position also remained strong during the quarter, with its operating cash flow standing at $228.3 million. It generated $51.3 million in free cash flow and paid $43.4 million in dividends, which shows that its dividends are safe with its cash flow.
At the end of Q2 2022, 23 hedge funds in Insider Monkey’s database reported owning stakes in National Fuel Gas Company (NYSE:NFG), up from 21 in the previous quarter. The collective value of these stakes is over $180.6 million. With stakes worth over $78.7 million, GAMCO Investors held the largest position in the company in Q2.
8. Stanley Black & Decker, Inc. (NYSE:SWK)
P/E Ratio: 14.83
Stanley Black & Decker, Inc. (NYSE:SWK) manufactures industrial tools and household hardware. The company is also a leading provider of security products in the US. In the first six months of 2022, the company had $282.3 million in cash and cash equivalents, compared with $142.1 million at the end of December 2021. In Q2 2022, the company’s revenue came in at $4.4 billion, which showed a 16% year-over-year growth. Its operating margin of sales for the quarter was 8.1%.
On July 20, Stanley Black & Decker, Inc. (NYSE:SWK) hiked its quarterly dividend by 1.3% to $0.80 per share. The company has been making consistent dividend payments for the past 146 years while maintaining a 54-year streak of dividend growth. The company has an industry’s leading annual dividend payments record. As of September 6, the stock’s dividend yield was recorded at 3.75%.
In August, Morgan Stanley maintained its Overweight rating on Stanley Black & Decker, Inc. (NYSE:SWK) with a $110 price target, appreciating the company’s latest programs which would drive its EPS growth in the second half of FY22.
As per Insider Monkey’s Q2 2022 database, 32 hedge funds owned investments in Stanley Black & Decker, Inc. (NYSE:SWK), compared with 38 in the previous quarter. These investments hold a collective value of nearly $497 million, down from $922 million worth of stakes owned by hedge funds in the preceding quarter.
7. Lowe’s Companies, Inc. (NYSE:LOW)
P/E Ratio: 15.15
Lowe’s Companies, Inc. (NYSE:LOW) is a North Carolina-based retail company that specializes in products related to home improvement. The company was a part of 53 hedge fund public portfolios in Q2 2022, compared with 65 in the previous quarter. The stakes owned by hedge funds hold a combined value of roughly $5 billion. With over 10.2 million shares, Pershing Square was the company’s leading stakeholder in Q2.
In Q2 2022, Lowe’s Companies, Inc. (NYSE:LOW) reported a 0.2% growth in its comparable sales for the US improvement business. The company’s cash position came in strong as its operating cash flow grew to over $3 billion, from $2.9 billion in the previous quarter. It generated roughly $2.7 billion in free cash flow, up from $2.6 billion in the preceding quarter. The company’s dividend payments amounted to $524 million during the quarter, which takes its payout ratio to 27.08%.
On August 26, Lowe’s Companies, Inc. (NYSE:LOW) declared a quarterly dividend of $1.05 per share, consistent with its previous dividend. The company has been paying uninterrupted dividends since its IPO in 1961 and holds a 59-year track record of consistent dividend payments. The stock’s dividend yield came in at 2.18% on September 6.
In August, Truist raised its price target on Lowe’s Companies, Inc. (NYSE:LOW) to $263 and maintained a Buy rating on the shares. The firm mentioned that the company’s trends remained solid with its strong DIY sales.
Pershing Square Capital Management mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q4 2021 investor letter. Here is what the firm has to say:
“Lowe’s is a high-quality business with significant long-term earnings growth potential
Supportive macroeconomic backdrop
-Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing marketPositioned to grow EPS largely independent of market conditions
-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022Multi-year business transformation with substantial earnings upside
-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing
-Potential to generate high-teens EPS growth over the next several years.Lowe’s continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”
6. Stepan Company (NYSE:SCL)
P/E Ratio: 15.16
Stepan Company (NYSE:SCL) is an American chemical manufacturing company that provides innovative chemical solutions to its consumers. The undervalued dividend king has been raising its dividends consistently for the past 54 years. It currently pays a quarterly dividend of $0.335 per share and has a yield of 1.36%, as recorded on September 6. The company has a healthy payout ratio of 20.09%.
In Q2 2022, Stepan Company (NYSE:SCL) reported revenue of $751.6 million, which showed a 26.2% year-over-year growth. Its operating cash flow for the quarter came in at over $59 million, up from $20.9 million in the previous quarter. It also generated over $10 million in free cash flow during the quarter and paid $7.5 million in dividends to shareholders.
In July, Stifel reiterated its Buy rating on Stepan Company (NYSE:SCL) with a $133 price target, highlighting the company’s strong Q2 results. However, the firm presented a conservative view of its margin expansions due to supply chain issues.
As of the close of Q2 2022, 10 hedge funds tracked by Insider Monkey owned stakes in Stepan Company (NYSE:SCL), down from 11 in the previous quarter. The consolidated value of these stakes is over $16.2 million. Citadel Investment Group was the company’s leading stakeholder in Q2, owning stakes worth over $3.8 million.
Stepan Company (NYSE:SCL) can be a good investment option for income investors among other dividend companies like The Coca-Cola Company (NYSE:KO), Exxon Mobil Corporation (NYSE:XOM), and Johnson & Johnson (NYSE:JNJ).
LRT Capital Management mentioned Stepan Company (NYSE:SCL) in its Q3 2021 investor letter. Here is what the firm has to say:
“Stepan is an under-the-radar company with a market capitalization of approximately $3.0b.52 The company is engaged in the manufacturing of specialty chemicals, primarily for the cleaning industry. The company’s products are the principal ingredients in consumer and industrial cleaning products such as washing detergents, as well as shampoos, body washes, and fabric softeners. The company’s specialty products include emulsifiers, food stabilizers, flavorings, and nutritional supplements.
Don’t let the dullness of the company’s products fool you. While Stepan operates in a commoditized industry, the company has been an efficient operator and has been able to expand margins over time. What looks on the surface like a cyclical, commoditized business is in fact a very resilient provider of key inputs to daily necessities such as body and household cleaning products. Due to its resilience through different economic cycles, Stepan has been able to increase its annual dividend for 54 years in a row. What’s more, payouts to shareholders did not come at the expense of reinvesting in the business. The company has grown earnings-per-share by a factor of 5x over the last two decades while maintaining returns on invested capital in the mid-teens.”
5. Emerson Electric Co. (NYSE:EMR)
P/E Ratio: 15.43
Emerson Electric Co. (NYSE:EMR) is a Missouri-based manufacturing company that also provides engineering services for industrial, commercial, and consumer markets. Appreciating the company’s strong earnings in the recent quarter, Argus lifted its price target on the stock in August to $98 and maintained a Buy rating on the shares. The firm also highlighted the company’s strong balance sheet and one of the market’s longest dividend growth streaks.
Emerson Electric Co. (NYSE:EMR) has been raising its dividends consistently for the past 64 years. It pays a quarterly dividend of $0.515 per share and has a yield of $2.53%, as recorded on September 6.
In Q2 2022, Emerson Electric Co. (NYSE:EMR) reported an operating cash flow of $740 million, up from $442 million in the previous quarter. The company generated $630 million in free cash flow during the quarter, compared with $333 million in the preceding quarter. Its revenue for the quarter also grew by 7% year-over-year to $5 billion.
The number of hedge funds tracked by Insider Monkey owning stakes in Emerson Electric Co. (NYSE:EMR) stood at 47 in Q2 2022, growing from 45 in the previous quarter. The collective value of these stakes is over $1.2 billion. D E Shaw is one of the company’s most prominent stakeholders in Q2, owning stakes worth over $88 million.
4. 3M Company (NYSE:MMM)
P/E Ratio: 16.28
An American multinational consumer goods company, 3M Company (NYSE:MMM) holds one of the longest dividend growth streaks in the market. The company has been raising its payouts consistently for the past 64 years. Moreover, it has paid uninterrupted dividends to shareholders for over 100 years. The company currently pays a quarterly dividend of $1.49 per share and has an attractive yield of 5.11%, as recorded on September 6.
In Q2 2022, 3M Company (NYSE:MMM) reported an operating cash flow of $1.1 billion and its free cash flow came in at $1 billion. The company’s dividends for the quarter amounted to $800 million, signaling strong FCF generation. It generated 8.7 billion in revenues in Q2 and also reported a 1% year-over-year growth in its organic sales.
In August, Bernstein resumed its coverage of 3M Company (NYSE:MMM) with a Market Perform rating and a $155 price target, highlighting the company’s mid-single digits annual earnings.
At the end of Q2 2022, 54 hedge funds tracked by Insider Monkey had over $1.38 billion worth of investments in 3M Company (NYSE:MMM). In the previous quarter, 51 hedge funds owned stakes in the Minnesota-based company, valued at over $1.53 billion.
Mayar Capital mentioned 3M Company (NYSE:MMM) in its Q2 2022 investor letter. Here is what the firm has to say:
“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.
3. Dover Corporation (NYSE:DOV)
P/E Ratio: 16.30
Dover Corporation (NYSE:DOV) is an American manufacturing company that delivers innovative equipment and components and consumable supplies. In Q2 2022, the company reported revenue of $2.16 billion, which showed a 6.4% year-over-year growth. The company’s operating cash flow for the quarter came in at $178.7 million, compared with $23.6 million in the previous quarter. Its free cash flow also jumped to $128.5 million, from $26.7 million in the preceding quarter.
On August 4, Dover Corporation (NYSE:DOV) declared a 1% hike in its quarterly dividend to $0.505 per share. This was the company’s 67th consecutive year of dividend growth. As of September 6, the stock’s dividend yield came in at 1.57%.
In July, Mizuho reiterated its Buy rating on Dover Corporation (NYSE:DOV) with a $155 price target, as customers’ ordering behaviors are normalizing after the pandemic.
Adage Capital Management owned stakes worth over $100 million in Dover Corporation (NYSE:DOV), becoming the company’s leading stakeholder in Q2. Overall, 30 hedge funds in Insider Monkey’s database owned stakes in the company in Q2, up from 27 in the previous quarter. These stakes hold a total value of $420.3 million.
2. Commerce Bancshares, Inc. (NASDAQ:CBSH)
P/E Ratio: 17.51
Another undervalued dividend king to buy on this list is Commerce Bancshares, Inc. (NASDAQ:CBSH), a Missouri-based bank holding company. The company provides services in mortgages, loans, and credit cards. In July, Jefferies maintained its Hold rating on the stock with a $71 price target, highlighting the company’s strong loan growth and net interest income.
In Q2 2022, Commerce Bancshares, Inc. (NASDAQ:CBSH) reported an operating cash flow of over $161.6 million, up from $124.5 million in the previous quarter. The company generated $148.2 million in free cash flow, compared with $109 million in the preceding quarter. During the quarter, it paid roughly $32 million in dividends, which shows its strong FCF generation.
Commerce Bancshares, Inc. (NASDAQ:CBSH) currently pays a quarterly dividend of $0.265 per share, with a dividend yield of 1.57%, as of September 6. The company is a dividend king with 53 years of consecutive dividend growth.
At the end of June 2022, 17 hedge funds in Insider Monkey’s database owned stakes in Commerce Bancshares, Inc. (NASDAQ:CBSH), valued at $112.7 million. In the previous quarter, 16 hedge funds owned stakes in the banking company, with a total worth of $132.2 million.
1. Northwest Natural Holding Company (NYSE:NWN)
P/E Ratio: 20.00
Northwest Natural Holding Company (NYSE:NWN) is an Oregon-based natural gas distribution company. In Q2 2022, 10 hedge funds tracked by Insider Monkey owned stakes in the company, falling from 22 in the previous quarter. The consolidated value of these stakes is over $38.2 million.
On August 4, Northwest Natural Holding Company (NYSE:NWN) reported its Q2 2022 results, posting revenue of $194.9 million, up 31% from the same period last year. In the first six months of the year, its operating cash flows came in at $196.6 million, compared with $194 million in the prior-year quarter. It ended the quarter with $17.2 million available in cash and cash equivalents, with total assets amounting to $358 million.
One of the best-undervalued dividend kings, Northwest Natural Holding Company (NYSE:NWN) has been raising its payouts consistently for the past 66 years. It pays a quarterly dividend of $0.4825 per share and has a dividend yield of 4.00%, as of September 6.
You can also take a look at 10 Best Stocks That Pay Monthly Dividends and 10 Best Blue Chip Dividend Stocks to Invest In
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Disclosure. None. 10 Best Undervalued Dividend Kings to Buy in September is originally published on Insider Monkey.
