Finding value can be difficult on the markets these days as stocks continue to soar to new heights. However, if you're an income-oriented investor, there are some gems out there that have been declining in value this year that could make excellent additions to your portfolio.
While you likely won't see shares of Becton, Dickinson (BDX 0.06%) or Kimberly-Clark (KMB -1.04%) take off anytime soon, you also aren't going to be paying much of a premium to own these reliable dividend stocks, either. With solid financials, low valuations, and yields no worse than the S&P 500 average, these are cheap investments you'll be smiling about for years.
1. Becton, Dickinson
Becton, Dickinson (BD) is a Dividend Aristocrat that has been increasing its dividend payments for more than four decades straight. If it raises its payouts again this year, it will become a Dividend King. Although its 1.4% yield isn't all that exciting right now and is in line with what you would get with the average stock on the S&P 500, you will likely earn more on your initial investment the longer you hang on to shares of BD, given its likelihood to increase its payouts.
The company is coming off a year of mixed results. Over the six-month period ending March 31, sales from its Life Sciences division soared 59% from the prior-year period to $3.6 billion, and that's mainly due to its COVID-19 testing products. But other areas haven't done nearly as well, including surgical products, where sales declined during the same period.
With COVID-19 case numbers falling as more people in the U.S. get vaccinated, there hasn't been as much excitement around stocks like BD that have benefited from products that test for the coronavirus. But for investors, this a great opportunity to buy a top dividend stock at a discount. Shares of BD are trading within 10% of their 52-week low. And with analysts projecting some stronger results for the company this year as things get back to normal (which includes hospitals resuming their normal day-to-day procedures), you're only paying a forward price-to-earnings (P/E) multiple of 18 for BD stock. In the Health Care Select Sector SPDR Fund, the average stock is trading at 27 times its profits.
BD could be an underrated buy, as investors may be overlooking this bargain income stock. If you're a long-term investor, now may be the optimal time to buy and forget about BD.
Another stock that isn't getting much love these days is Kimberly-Clark. Trading at a forward P/E ratio of less than 18, it's an even cheaper buy than BD. Other notable consumer goods stocks, Colgate-Palmolive and Clorox, are trading at multiples of 24 and 22 times their future earnings, respectively. And another reason Kimberly-Clark is a better option for income investors: Its 3.4% dividend yield is higher than those stocks' payouts.
Although investors may not be bullish on Kimberly-Clark because it's coming off a year fueled by pandemic-induced buying habits, its top line for the full-year 2020 grew by only 3.7% from 2019, up to $19 billion. It's not as if the company's sales skyrocketed to heights that it can't possibly sustain over the long term. Even if there's a drop-off in revenue, it likely won't be a huge decline. What's great about Kimberly-Clark is how remarkably consistent the business has been over the years: From 2016 through to 2019, its revenue barely moved, staying within a range of $18.2 billion to $18.5 billion. While there has been a bit more volatility on its bottom line, the company's profit margin has been above 10% in four of the past five years.
If it's stability and a cheap dividend stock you want, look no further than Kimberly-Clark. While people are loading up on wildly overpriced growth stocks, you can secure this top dividend stock that, like BD, is one hike away from becoming a Dividend King.