50 years of increased dividends? Check. Undisputed presence in their respective sectors? Check. Strong history of weathering economic cycles and surviving while giving back to investors? Double check. 

That’s why I love Dividend Kings. However, these big companies don’t tend to offer much in capital returns—or so people think. 

The truth is, Dividend Kings can just be as profitable as any other stock out there. You only need to consider if they’re trading at lower valuations. Combined with their consistent dividends, you have a recipe for a great addition to your retirement portfolio. 

In this article, you’ll discover the most undervalued, buy-rated Dividend Kings out there, and perhaps one or two might pique your interest. 

How I Screened For The Following Stocks

I used a pre-prepared Barchart Watchlist to spot the most undervalued Dividend Kings. After accessing the watchlist, I clicked on the "SCREEN" option, which directed me to the Barchart Stock Screener.

Then, I selected the following filters to get the most undervalued Dividend Kings today: 

• P/E Ratio TTM: I focused on stocks with low P/E ratios (0.01-20) compared to sector averages to identify potentially undervalued stocks trading at a discount relative to their earnings, which may indicate attractive investment opportunities.
• Current Analyst Ratings: Stocks with Moderate Buy to Strong Buy ratings were prioritized to identify those with growth potential and minimize the risk of investing in declining stocks that are "cheap" due to underlying issues.

After applying the selected filters, I sorted the 16 resulting stocks from the HIGHEST to LOWEST P/E ratio by clicking the "P/E (ttm)" column heading. 

With all those criteria and filters applied, let’s talk about the top three most undervalued Dividend Kings, from highest to lowest.  

SJW Corp (SJW)

P/E TTM: 19.72

Utilities Sector P/E TTM: 19.89

I’ll start with a prominent Dividend King in the water utilities sector, SJW Group. The company delivers services to California, Connecticut, Maine, and Texas communities through its wholly-owned subsidiaries: San Jose Water Company, SJWNE LLC, SJWTX Holdings, Inc., and SJW Land Company.

SJW can be the best bet for investors looking for a stable income stream. The company's track record of rewarding shareholders includes 56 consecutive years of annual dividend increases. In terms of dividends, SJW Corp offers its investors an annual payout of $1.60 per share, translating to a dividend yield of 3.06%.

Moving to the finer details of their financials, SJW Group announced its Q1'24 results, and they paint a mixed picture. The company reported a revenue of $149.4 million, an increase from the $137.3 million reported YOY. However, net income took a very slight dip—dropping to $11.3 million from $11.6 million, translating to a quarterly EPS of $0.36.

Despite the minor setback, the company reduced its current long-term debt from $49 million to $9 million, which is never a bad thing in a high-interest environment. Wall Street analysts have a consensus rating of 3.67, or a moderate buy sentiment, with an upside potential of 39.47%.

H. B. Fuller Company (FUL)

P/E TTM: 19.61

Materials Sector P/E TTM: 24.92

The next undervalued Dividend King has established itself as a formidable player in the world of adhesives: H. B. Fuller Company. The company is renowned for developing solutions catering to various industries, such as hygiene, health, transportation, etc.

H.B. Fuller isn’t one to back down when it comes to dividends. It recently celebrated its 55th consecutive year of dividend increases. For those looking to benefit from its long-term stability, its current dividend yield is 1.14%, with an annual payout of $0.89 per share.

A “pretty solid YOY performance” is what HB Fuller’s Q1’24 financials are all about. The company reported $810.4 million in revenue, a slight increase from $809.2 million. That said, net income jumped significantly —from $21.9 million to $31 million, translating to a quarterly EPS of $0.57.

Analysts have also taken note on H.B. Fuller's strong fundamentals, rating it a moderate buy, and issuing it a high target price of $115, suggesting a potential upside of 47.42%. 

Becton Dickinson and Company (BDX)

P/E TTM: 19.49

Health Care Sector P/E TTM: 33.84

Our last undervalued Dividend King is revolutionizing healthcare, one step at a time: Becton Dickinson and Company. The company has long solidified its position as a leader in medical technology. Today, BD’s main segments include BD Medical, BD Life Sciences, and BD Interventional, and they all work together to provide modern healthcare solutions.

Becton Dickinson and Company has also rewarded shareholders with 52 consecutive years of dividend increases. Today, its annual payout is $3.80 per share, with a dividend yield of 1.59%.

The company's recent Q2'24 financials pointed to its ability to generate strong returns, with revenue growing by 4.6% to $5.05 billion and net income surging by 22.6% to $537 million, which translates to a quarterly EPS of $1.85.

Meanwhile, the consensus rating for BDX is solid 4.56, or a strong buy with a potential upside of 32.19% from its current levels. If that’s not all, BDX's P/E ratio TTM of 19.49 indicates that the company is potentially the most undervalued company on this list, compared to the industry standard of 33.84.

Final Thoughts

Dividend Kings are the bread and butter of income investing. Still, you don’t have to settle with buying at the top and hoping that dividend payouts will cover your paper losses. Instead, get the ones trading at bargain prices, and your retirement portfolio and future self will thank you. 

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On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.