3 Undervalued Dividend Aristocrats to Buy Before They Soar in July

One of the best ways to protect your portfolio and generate income is by buying dividend stocks — especially Dividend Aristocrats. To qualify for this exclusive club, companies need to have grown their dividend payments for more than 25 years consecutively. For income-focused investors, the stocks that qualify as Dividend Aristocrats can be the backbone of a dividend portfolio. 

Key Points About This Article 

• Dividend Aristocrats have paid out dividends for more than 25 years. They’re also among the safest stocks to buy and hold. 
• With a yield of 5.64%, Realty Income has been paying out a dividend for over 30 consecutive years.
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As an example, look at real estate investment trust (REIT) Realty Income (NYSE: O), the so-called Monthly Dividend Company. With a yield of 5.64%, the real estate investment trust (REIT) has been paying a dividend for over 30 years. Its latest dividend of $0.2690 will be paid on July 15 to shareholders of record as of July 1.

After shares recovered from about $50 to $57.20, we still expect the stock to rally higher. Some of the other top, most undervalued Dividend Aristocrats to consider include the following:

Amcor PLC (AMCR)

With a yield of 5.54%, Dividend Aristocrat Amcor (NYSE: AMCR) develops, produces, and sells packaging products in Europe, North America, Latin America and the Asia Pacific. It operates in two segments, Flexibles and Rigid Packaging.

With regards to flexible packaging, Markets and Markets says the market, valued at $248.9 billion in 2022, is expected to grow to $315.5 billion by 2027. With Rigid Packaging, Fortune Business Insights expects the market to grow from $431.97 billion in 2023 to $704.24 billion by the time 2032 rolls around thanks to substantial demand.

So, there’s a good deal of growth over the long haul.

Unfortunately, the Dividend Aristocrat has been struggling with recent earnings weakness. Its EPS of 14 cents missed by a penny. Revenue of $3.33 billion, down 2.3% year over year, missed by $140 million. However, there are a few catalysts that could point to a recovery.

For one, CEO Peter Konieczny bought 100,000 shares for $1 million just days ago. And two, the stock was also upgraded to a buy rating at Truist, citing AMCR’s acquisition of Berry Global as a key catalyst. As noted by the firm, “The company has multiple avenues at its disposal to drive more pronounced volume growth, EBITDA, and FCF post-acquisition of Berry Global, which we view as a transformational transaction.”

Target Group (TGT)

With a yield of 4.67%, battered shares of Target (NYSE: TGT) are ridiculously undervalued. It’s one of the worst performers of the year. Poor growth numbers and concerns about discretionary spending have certainly weighed on the stock. Plus, it’s trading at just 11.8x forward earnings, which is far lower than normal. It’s also trading at less than sales.

However, the stock is showing some signs of life. And as we wait for its recovery over the long haul, we can collect its recently raised quarterly dividend of $1.14 per share, which is payable on September 1 to shareholders of record as of August 13.

Granted, Target has come under pressure on earnings. However, it does look like most of the negativity has been priced into the retailer. Helping, TD Cowen analysts just initiated coverage of the stock with a hold rating, with a price target of $105.

“The analysts highlighted Target’s attractive core business, which is supported by innovative and exclusive products, as well as profitable digital fulfillment strategies with potential for scale,” as noted by Investing.com.

McDonald’s (MCD)

With a yield of 2.48%, Dividend Aristocrat McDonald’s (NYSE: MCD) is another undervalued investment opportunity to consider. Not only does it rake in billions operating as a franchise fast food joint, but it’s also a real estate business. It owns a good deal of its land and buildings, which provides another key source of revenue.

According to Finance Monthly, “McDonald’s earns more from real estate and franchise fees than from actual food and beverage sales, making the franchising model central to its long-term financial success. According to McDonald’s Corporate site, the company plans to expand to 50,000 restaurants by the end of 2027, marking the fastest unit growth in its history.”

Granted, MCD has been struggling with traffic concerns, comparable sales, and a slowdown in general spending. However, as we wait for MCD to bounce back, we can collect its dividend. Plus, as noted by Jefferies, the dip is a buy opportunity.

With a buy rating and a price target of $360, Jefferies likes MCD’s “defensive qualities and brand positioning during uncertain economic times as key factors supporting its outlook,” as noted by Investing.com.

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