Dividend aristocrats are those elite income stocks that have boosted their dividends every year for at least 25 years. These companies have a track record of making money consistently and staying financially strong through all sorts of market ups and downs. For folks who want a reliable stream of income from their stock investments, the dividend aristocrats are a solid choice.

But, not every dividend aristocrat is a slam dunk. Just like any other stock, it's important to consider whether the shares might be overpriced, or facing particularly tough fundamental challenges ahead, before buying shares. In today's volatile market, it's all about finding those diamonds in the rough!

With this in mind, here we'll highlight some dividend aristocrats that look fairly priced at current levels, and offer healthy growth potential going forward to complement those regular dividend payouts. So, stay tuned, because we're about to spill the beans on our top picks for undervalued dividend aristocrats you might want to scoop up on the cheap. 

Archer-Daniels-Midland Company: An Agricultural Dividend King

Archer-Daniels-Midland Company (ADM) is a big shot in the world of agribusiness and nutrition. This company covers everything from the farm right to your plate, with its business divided into Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition and Other. ADM's got a strong financial foundation, with a market cap of $38 billion and EBITDA of $5.1 billion - and they're not shy about investing in growth or giving back to shareholders. 

In terms of yield, ADM isn't just any regular Dividend Aristocrat; it's a bona fide Dividend King, having upped its payout for a whopping 50 years straight! The dividend game is strong, with a juicy 2.45% yield beating the S&P 500 Index's ($SPX) average payout of 1.35%. Plus, ADM plays it safe with a conservative dividend payout ratio of 22.89%, leaving ample room for growth down the road.

Like many dividend stocks, ADM has taken a tumble this year, down by 22%. 

But here's the silver lining – it's a steal right now, trading at a mere 9x forward earnings - well below the sector median, and a level we haven't seen in over a decade. In fact, ADM's P/E ratio of 9x and PEG ratio of 1.53x are both lower than their industry peers, pointing to a stock that's undervalued considering its expected earnings growth.

When it comes to ADM, it seems like the market might have blinked and missed the big picture. Food demand isn't going anywhere, folks. And there's a growing need for animal feed and biofuels, especially with the push for renewable biodiesel. Plus, the continuing Ukraine conflict could prop up wheat prices as Russia eyes an export ban set to start in December. Meanwhile, ADM is working on expanding regenerative agriculture with the Farmers Business Network (FBN).

If you're into earnings surprises, ADM's right in your wheelhouse. They've beaten bottom-line expectations for the last four quarters, with an average upside surprise of 16%. In their most recent report for Q3 2023, they posted earnings per share of $1.63, handily beating the consensus estimate of $1.50. 

And in the analysts' corner, it's looking pretty optimistic. Seven out of 12 are shouting "strong buy," with the remaining five suggesting a "hold." The average target price for ADM is $93.73, signaling a potential 29% upside from current prices. 

Target Corporation: A Resilient Retail Investment Opportunity

Target Corporation (TGT) is one of the largest retailers in the U.S., offering a wide range of products and services across various categories, such as beauty, apparel, home, food, and essentials. They've got over 1,900 stores and a slick online setup, serving a ton of customers.

Their stock had a bit of a rollercoaster in 2023. After starting the year at around $146 a share, TGT has pulled back 25% to trade around $111 - and you might wonder why. 

Well, it's all about how folks feel about spending money, and Target's CEO says consumers are now cutting back on everything from discretionary items to groceries. 

But don't count Target out just yet, despite a challenging macro environment. They've shifted from brick-and-mortar and are now all about that omnichannel game, offering services like same-day delivery, drive-up, and order pickup. And guess what? These services are raking in more cash with fatter profit margins than old-school sales. 

They've also beaten earnings expectations in three out of the last four quarters, with an average upside surprise of 27%. In Q2 2023, even as revenue fell 4.9% from the previous year, they still managed to beat estimates with earnings per share of $1.80. 

Target also paid dividends of $499 million during the quarter, up from $417 million in the year-ago period, thanks to a 20% hike in the stock's dividend. Right now, the stock comes with a sweet 3.96% yield, making it a solid choice for folks hunting for income. Plus, TGT has $9.7 billion remaining under its stock buyback authorization.

In terms of scale, Target's got a market cap of $50 billion and EBITDA of $9.8 billion. And when you stack them up against their retail buddies, their forward P/E ratio looks pretty modest. The consumer staples sector sports a median forward P/E ratio of 16.9x, while Target is priced at 14.5x forward earnings. The stock's forward PEG multiple of 1.1 is also roughly 49% below the sector median. 

And what do the analysts say? The consensus rating among 29 analysts is a “moderate buy,” with this group projecting potential upside of nearly 35% from current levels, based on the mean target price of $150.15. 

Despite recent challenges, Target remains a resilient investment opportunity offering value, growth, and income to investors seeking stability and potential growth.

Sysco Corporation: Serving Up Food Service Excellence

Sysco Corporation (SYY) is the global leader in food service distribution, serving over 500,000 customer locations in more than 90 countries. The company offers a wide range of products and services, including fresh and frozen foods, beverages, equipment, supplies, and logistics solutions. 

Sysco’s stock has experienced a bearish trend throughout 2023. The stock started the year at around $75 per share, but has since declined more than 14% to trade near $65.

But Sysco's still faring pretty well, financially speaking. In Q2 2023, despite a 5% revenue drop, they still managed to beat EPS estimates by a cent. Profits arrived at $1.34 per share, thanks in part to cost-cutting efforts. 

Looking ahead, Sysco's earnings are expected to rise to $4.74 per share in fiscal 2025. Longer-term initiatives could support that bottom-line forecast; they're expanding globally, diversifying their goods, and leveraging the cloud to help boost sales. 

And dividend lovers, this one's for you. Sysco offers a 3% yield backed by decades of consistent growth, and the payout ratio is 48% - making the stock an appealing option for those seeking income picks.

The stock looks like a solid value now, too. Sysco's forward P/E ratio of 15x is comfortably below the sector median, and so is the forward PEG multiple of 1.19. This indicates that SYY might be a steal based on expected earnings.

Experts are generally bullish on this one, with the majority of 13 analysts giving it a "strong buy." In total, 10 rate SYY as a "strong buy," and three more suggest a “hold.” The mean target price for Sysco is $84.45, implying expected upside of 29% from here.

Conclusion

In a market where finding a true bargain seems more challenging than ever, we've uncovered three dividend aristocrats that might just be your golden opportunity. Despite recent headwinds, Target, Archer-Daniels-Midland, and Sysco all offer robust dividend histories, along with a commanding presence in typically defensive industries - suggesting their long-term resilience is set to continue through whatever mayhem the economy brings next. For investors looking to scoop up high-quality dividend stocks at a bargain, look no further.