3 Undervalued Dividend Aristocrats Trading Just Above Their 52 Week Lows

Rick Orford - Barchart - Wed Mar 13, 3:24AM CDT

Everybody loves a discount. There’s a tangible thrill in looking for bargains and a certain guilty pleasure in knowing that you one-upped someone—or everyone—with your purchase. This feeling is magnified in the stock market, where it is imperative to get a good entry point - i.e. buy companies at the lowest possible price. By doing so, investors benefit from a higher dividend yield, and the potentially sell them at a higher price down the line.

That said, if you've read any of my work before, you'll know I'm a buy-and-hold-forever type of investor. In fact, my average holding period currently hovers around 9 years.

However, not everyone has the patience to wait out the potential growth of some stocks over longer time horizons, as some investors prefer risky yet fast-moving, triple-digit returns as fast as possible.

But for those who want low-risk, bargain purchases and can afford to wait, Dividend Aristocrats trading near their 52-week lows typically offer reliable income and potential mid- and long-term growth.

Why Use The 52-Week Low?

52-week lows can be a good indicator for certain trading situations. For example, they are a good historical comparison for price levels. With them, we can find at what price levels buyers started to swoop in and push prices up. They also serve as a technical and psychological support range and may indicate that the company is undervalued.

How To Screen For Stocks Near Their 52-Week Low

The proximity of a stock to its 52-week low can be expressed as a percentage. There is a formula for computing it, but that's for another day. Today, I'll explain easier way.

You can use Barchart’s Watchlist and Screener functions to make filtering stocks a breeze. First, create a watch list for your preferred stocks, like Dividend Aristocrats, Kings, or tech and other industries.

Next, you can use several filters on the Screener page to further narrow your search. Barchart offers dozens of filters that you can effortlessly search using keywords.

Or, you can do this in reverse order and use the Screener function to find your preferred stocks and save them as individual watch lists. Then, you can use different filters to narrow down the list.

Now that’s out of the way, let’s discuss the Dividend Aristocrats trading near their 52-week lows.

Pepsico Inc (PEP)

Pepsico Inc. is a food and beverage company that offers a wide range of products across the United States and other countries. The company owns and operates Frito-Lay North America, Quaker Foods North America, and PepsiCo Beverages North America.

PEP’s 2023 year-end report pointed to relatively soft growth. Net revenue increased by 5.9%, while EPS grew 2% YoY. Foreign exchange rates also negatively impacted the year’s results and are not expected to change anytime soon. However, the company has expressed moderate optimism for 2024, expecting a 4% increase in organic revenue and 8% growth in EPS (constant currency).

Pepsico has increased dividend payouts for 51 years. Its dividend payout ratio is a little higher at 64.60%, but with FY'24 expected EPS at $8.15 and an annual dividend of $5.06, the company should be able to continue increasing its payouts down the line.

PEP is currently trading 5.59% away from its last 52-week low.

Becton Dickinson And Company (BDX)

Becton Dickinson And Company offers comprehensive products and solutions to medical facilities worldwide. The company is divided into three segments: BD Medical, BD Life Sciences, and BD Interventional. BDX provides equipment production and management solutions to all facets of the medical industry, including admin, clinics, equipment distribution, drug development, pharmacies, surgery suites, and laboratories.

BDX reported mixed results in Q1'24. Revenue increased 2.6%, while adjusted diluted EPS was 10.1% lower YoY. Still, the company recently increased its quarterly dividend by 4.4% to $3.80 per share for fiscal year 2024, or a 1.60% forward yield based on current prices. This represents the 52nd year of dividend increases—and with a low 30.43% payout ratio, these increases will most likely keep on coming.

BDX is currently trading 4.03% away from its last 52-week low.

Brown Forman Inc Cl B (BF.B)

Sin stocks aren’t everyone’s cup of tea, but investors with no scruples who are open to any potential buys should look at good ones with great prospects. For example, Brown Forman Inc. makes and distributes some of the world's best-known alcoholic beverages. Its 40+ brands include the different variants of Jack Daniels, Old Forester Whiskey, Woodford Reserve Kentucky, Fords Gin, Coopers' Craft, Sonoma-Cutrer, and Part-Time Rangers canned beverages.

Business is good at Brown Forman. Annual sales have been on an upward trend since 2019, with FY'23 reaching $5.37 billion and growing by 5.71% compared to last year’s $5.08 billion. The bottom line figures were slightly lower than last year, though, from $1.75 to $1.63 per share. Gross margins are also down from 60.8% to 59.0% YoY.

However, income investors still have reason to stick with BF.B. Though its annual dividend is only $0.85 or 1.54%, the company balances it with a low 41.34% payout ratio that ensures continued growth. The company has also increased dividends for 39 consecutive years.

BF.B is currently trading 3.31% away from its last 52-week low.

Final Thoughts

Dividend Aristocrats trading at bargain prices are excellent prospects for income investors, as they also present a chance for capital appreciation in the long run. However, that’s no reason to grow complacent; practice prudence, monitor your positions, and be prepared to make the required changes if and when necessary. Remember: prices can always go lower.

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On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.