After a good number of years languishing on the sidelines, dividend stocks are finally getting their due. Investors have a habit of ignoring them in good times, and rediscovering them only when the market takes a tumble again. But investing in dividend-paying stocks has a number of perks, no matter what the economic climate.

First and foremost among those benefits is the steady stream of income they provide, offering some degree of financial certitude in uncertain times. What's more, dividend-paying stocks also tend to be less volatile than others, limiting their potential downside -- an important consideration in today's rollercoaster market.

And in fact, countless studies demonstrate that dividend-paying stocks actually outperform non-payers by a wide margin over the long run. Plus, spendable cash in pocket gives investors the option to do what they like with it -- and if they choose to reinvest, their overall investment grows at a compounded rate.

Clearly, there's plenty of incentive to jump on the dividend bandwagon. But be sure to look before you leap -- and remember that buying a stock at a reasonable valuation is an important part of the equation.

So how do you go about locating undervalued dividend stocks? There are any number of ways to find them, but one of the easiest methods is simply to follow the smart money. After all, they have teams of analysts in their employ, with plenty of time to sift through financial statements. So if the big boys are snapping up these stocks, you might want to pay attention.

To create this list, we started from a pool of dividend champions, comprised of companies that have paid out increasingly higher dividends for at least 25 straight years. We then narrowed down the list by focusing only on the stocks seeing institutional inflows over the last three months.

Here's our list of five dividend champions attracting institutional buying over the last three months. (Click here to access free, interactive tools to analyze these ideas.)

Institutional data sourced from Reuters. The list has been sorted by change in institutional ownership.


Dividend Yield

Shares Held Held by Inst. Investors Today

Shares Held Held by Inst. Investors 3 Months Ago

% Change in Inst. Ownership

Carlisle Companies (NYSE: CSL)





Family Dollar Stores (NYSE: FDO)





Questar Corporation (NYSE: STR)





Consolidated Edison (NYSE: ED)





C.R. Bard (NYSE: BCR)





Interactive Chart: Press Play to see how the market caps of all these stocks have changed over the last two years.

Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.

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