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Kroger Company(KR-N)

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3 Dividend Stocks Near Their 52-Week Lows to Buy Right Now

Motley Fool - Thu Feb 2, 7:15AM CST

The stock market is off to a good start in 2023 with the S&P 500 already up 5%. But while some growth stocks are already rallying, there are many quality dividend stocks out there that still look undervalued. Three stocks that are trading near their lows and that could be good buys this year are Medtronic (NYSE: MDT), Public Storage (NYSE: PSA), and Kroger (NYSE: KR).

1. Medtronic

It's easy to be down on medical device maker Medtronic as its sales and profits have been declining. The shares trade at 25 times earnings, which seems expensive given the lack of growth it has been generating of late. But with the stock trading near its 52-week low and now paying a dividend yield of 3.3%, which is well above the S&P 500 average of 1.7%, investors could be getting some great value from Medtronic's stock today.

The business should perform better this year as supply chain issues and lockdowns in China have lessened. In its emerging markets (e.g., Eastern Europe and Latin America), Medtronic's growth rate was 15% for the period ended Oct. 28, 2022, when excluding China. Economists expect a much stronger year for China in 2023 now that its restrictive COVID-19 lockdowns are over. A Reuters poll suggests the economy could grow at rate of 4.9% this year (versus just 2.8% in 2022).

A better outlook for China and a more consistent and stable supply chain could make Medtronic attactive now. For buy-and-hold investors, Medtronic is an excellent dividend stock to own, and it has increased its payout for 45 straight years.

2. Public Storage

At 2.7%, investors are getting another above-average yield with Public Storage. The real estate investment trust (REIT) has a portfolio full of self-storage options that can be crucial to consumers at a time when people may need to reduce their costs and downsize their homes in order to battle the effects of inflation. However, with investors down on REITs amid rising interest rates, Public Storage's stock has struggled, falling 25% last year.

But Public Storage isn't all that risky and its strong financials give the company plenty of room to not just pay dividends, but also take on more acquisitions to expand its pool of properties and increase its top line. Its 33% payout ratio is relatively light and could pave the way for generous increases in the future. Over the trailing 12 months, the company's operating profit of $2 billion has represented half of the revenue it has generated.

3. Kroger

Kroger's dividend yield of 2.3% is the lowest one on this list. But Kroger has also been increasing its dividend payments for over a decade, averaging a compound annual growth rate of 14% during that stretch, giving investors incentive to buy and hold the stock for the long haul.

The grocery store operator is one of the largest in the company and it's hoping to get bigger by to merging with Albertsons. The deal faces hurdles as critics argue it would hurt competition. But if it does happen, that would make the combined entity an even more lucrative investment to hold in your portfolio.

Kroger is the larger of the two businesses, generating $146 billion in revenue over the trailing 12 months -- about twice what Albertsons generates in a year.

Even if the deal doesn't end up going through, Kroger is still a top dividend stock to own. It has more than 2,400 grocery stores in 31 states and makes for an excellent defensive investment. It was a stable stock to buy last year, declining by less than 2%.

And at 14 times earnings and trading right around its 52-week low, the stock is still a good buy and has plenty of upside should its deal with Albertsons go through. And at worst, if it doesn't, it's a low-volatility dividend stock that would be a solid addition to an investor's portfolio.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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