We recently published a list of the 11 Undervalued Dividend Aristocrats to Buy Now. In this article, we are going to take a look at where Dover Corporation (NYSE:DOV) stands against other undervalued dividend aristocrats.

Dividend-paying stocks are regaining popularity this year as investors look for ways to soften the blow of current market challenges. The S&P Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, has fallen by a little over 1.2% since the start of 2025, compared with a 4.1% decline of the broader market. Analysts point out that dividends not only help boost overall returns early on, but there’s also clear evidence that companies with growing dividends tend to deliver stronger performance. These stocks often provide better returns with less risk, stay ahead of inflation, and hold up well whether interest rates are climbing or falling.

According to S&P Indices’ “Research Insights,” dividends have accounted for roughly a third of total returns since 1926. This is largely because, unlike stock prices that can fluctuate, dividends represent a guaranteed gain once paid out. Even in strong bull markets like the 1950s, 1980s, and 1990s, dividends played a meaningful role in enhancing investor returns. However, their true value becomes especially clear in weaker market cycles, when capital gains are modest or even negative, dividends have often made up more than half of the total return. In some cases, they’ve been the deciding factor in keeping returns positive. In essence, dividends tend to matter most when market performance falls short.

A report from Fenimore Asset Management reveals that between 1972 and 2016, companies that either raised or initiated dividends consistently outperformed those that did not. Historically, a dividend hike has often been viewed as a sign that management is confident in the company’s future. This concept is even the basis of the “Dividend Discount Model,” which values a company based on expected dividend growth.

On average, firms that grew or introduced dividends delivered annualized returns of 9.8%, outpacing businesses that didn’t pay dividends. These companies typically enjoy rising sales and earnings, generating more cash than they need for reinvestment, allowing them to reward shareholders regularly. This pattern also reflects a strong commitment by management and the board to return value to investors.

In contrast, companies that cut or eliminate dividends often struggle financially. These underperformers posted annualized returns of -0.6% during the said period, and such reductions usually point to a weakening business, limited growth prospects, or a need to redirect cash toward internal needs rather than shareholder payouts.

The report also highlighted that one of the key advantages of a growing dividend is its ability to preserve purchasing power over time. As inflation gradually pushes up the cost of living, dividend income needs to grow just to keep up. Assuming a long-term inflation rate of 2%, dividends must increase by at least that much to avoid losing value in real terms.

While investors seeking income may be drawn to stocks with high current yields, it’s just as important to consider how fast those dividends are growing. Focusing solely on yield without looking at growth can be short-sighted. In the long run, companies that steadily raise their dividends provide income that keeps pace with or even exceeds inflation, offering greater financial security.

Our Methodology:

For this list, we scanned the list of the S&P Dividend Aristocrats– the stocks that have raised their payouts for 25 years or more– and identified stocks with low forward P/E ratios. From there, we picked 11 dividend aristocrats with forward P/E ratios below 20, as of May 7, and ranked them accordingly.

At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Dover Corporation (NYSE:DOV)

Forward P/E Ratio as of May 7: 18.52

Dover Corporation (NYSE:DOV) is an American manufacturing company that produces a wide array of industrial equipment and components. The company provides cutting-edge equipment and components, consumable supplies, aftermarket parts, software, digital solutions, and support services across five key segments: Engineered Products, Clean Energy & Fueling, Imaging & Identification, Pumps & Process Solutions, and Climate & Sustainability Technologies.

In the first quarter of 2025, Dover Corporation (NYSE:DOV) reported revenue of $1.9 billion, down 1% from the same period last year. The company’s adjusted earnings from continuing operations came in at $$283 million, up 18% from the prior-year period. During the quarter, the company experienced strong and widespread demand and order activity, with notable momentum in markets tied to long-term growth trends such as single-use biopharma components, thermal connectors, and CO2 systems. A significant portion of revenue for the second quarter has already been secured in the backlog. The company also delivered outstanding margin performance, supported by a favorable mix from its high-margin, fast-growing platforms, along with effective cost control and productivity initiatives.

Dover Corporation (NYSE:DOV)’s cash position remained strong. The company generated $157.4 million in operating cash flow, and its free cash flow came in at over $109 million. On May 2, the company declared a quarterly dividend of $0.515 per share, which was in line with its previous dividend. Overall, it has been growing its dividends for the past 68 years, which makes it one of the best dividend aristocrat stocks on our list. The stock has a dividend yield of 1.2%, as of May 7.

Overall, DOV ranks 11th on our list of the best undervalued dividend aristocrats to buy now. While we acknowledge the potential of DOV as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than DOV but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.