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In this article, we will take a look at 12 best value dividend stocks to buy. If you want to see more of the best value dividend stocks to buy, go directly to 5 Best Value Dividend Stocks To Buy.
Inflation remains a headwind for the markets in 2022. In terms of inflation, the annual U.S. inflation rate was 8.2% in September, down only slightly from August's 8.3%.
Too much inflation isn't good for an economy as it makes many future investments harder to do. Inflation is also bad for many consumers as it takes away some of their buying power if their incomes don't rise enough to compensate for the price increases.
Given the high inflation, the Federal Reserve has raised rates five times to increase the federal funds effective rate from near zero in the beginning of 2022 to 2.56% in September 2022. As the federal funds effective rate has gone higher, some interest rate sensitive parts of the economy such as housing have cooled. Nevertheless, inflation remains high and many expect the Federal Reserve to raise interest rates further.
With the higher interest rates, Treasury yields have increased substantially and many traditional dividend stocks have become less attractive. Due to the interest rate hikes, the 10 year Treasury yield has gone from 1.512% at the end of 2021 to 4.209% as of 10/24, meaning many traditional attractive dividend stocks with yields of 2% or 3% actually have lower yields than the 10 year Treasury yield.
As a result, many dividend stocks are lower this year, along with the market. Given the uncertainty, it could be a good idea for investors to have a well diversified portfolio with stocks across many different sectors.
While there could still be more downside left given the potential for a recession in 2023, there is still potential for the high quality dividend stocks to bounce back in the long term if the Federal Reserve eventually controls the inflation.
Here are 12 high quality dividend stocks to consider.
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Methodology
For our list of 12 Best Value Dividend Stocks To Buy, we took quality stocks that had dividend yields of over 2% and whose average analyst price targets were 20% or higher above their stock prices as of 10/24.
Using the collective wisdom of hedge funds, we then ranked the 12 based on the number of hedge fund holders in our database who held shares in the stocks at the end of Q2 2022.
12 Best Value Dividend Stocks To Buy
12. Bank of Montreal (NYSE:BMO)
Dividend Yield as of 10/24: 4.73%
Number of Hedge Fund Holders: 12
Bank of Montreal (NYSE:BMO) is a leading Canadian bank with a dividend yield of 4.73% as of 10/24 whose shares are down 16% year to date. As a leading bank, Bank of Montreal (NYSE:BMO) faces headwinds given that Canada's economy could face headwinds in the next year.
The chief economist of the IMF Pierre-Olivier Gourinchas said of the Canadian economy, "The Canadian economy has been doing well in the rebound, but it's buffeted by the same winds that are affecting the global economy. There is a slowdown in the US that is coming. Commodity prices, energy prices are coming down. There are all the uncertainties, financial tightening and financial markets are very nervous. All of these factors are going to weigh down on on the Canadian economy next year."
In the long term, however, Canada's economy has a lot of growth potential given the country's massive resources, its proximity to the United States, and its relatively small population. As a result, Bank of Montreal (NYSE:BMO) is considered a value stock. Analysts have an average price target of $120.19 per share.
Alongside American Tower Corporation (NYSE:AMT), Lowe's Companies, Inc. (NYSE:LOW), and NXP Semiconductors N.V. (NASDAQ:NXPI), Bank of Montreal (NYSE:BMO) is a quality dividend stock that's owned by many hedge funds in our database at the end of the second quarter.
11. The Bank of Nova Scotia (NYSE:BNS)
Dividend Yield as of 10/24: 6.42%
Number of Hedge Fund Holders: 16
The Bank of Nova Scotia (NYSE:BNS) is another leading Canadian bank whose results depend on how the Canadian economy does. Given that The Bank of Nova Scotia (NYSE:BNS) has considerable international presence given its past acquisitions, the bank's stock also depends on Latin America and other regions. Given that there have arguably been more headwinds in Latin America than that have been in Canada, shares of The Bank of Nova Scotia (NYSE:BNS) have fallen more than its peer Bank of Montreal (NYSE:BMO).
As of 10/24, The Bank of Nova Scotia (NYSE:BNS) has fallen slightly over 34% year to date and shares have a dividend yield of 6.42%. Analysts have an average target price of $62.22 per share.
10. SAP SE (NYSE:SAP)
Dividend Yield as of 10/24: 2.28%
Number of Hedge Fund Holders: 16
Software giant SAP SE (NYSE:SAP) has fallen almost 35% year to date due to the broader market sell-off in tech stocks. As a result, SAP SE (NYSE:SAP) is arguably a dividend stock given its dividend yield of 2.28% as of 10/24. With a target price of $126.38 and a forward P/E ratio of slightly over 16, SAP SE (NYSE:SAP) has a lot of value. On 10/21, Toby Ogg of JPMorgan upgraded SAP SE (NYSE:SAP) to 'Overweight' from 'Neutral' and set a price target of EUR 115 from EUR 105 citing the potential for SAP SE (NYSE:SAP) to beat expectations in terms of its cloud transition.
At the end of the second quarter, Fisher Asset Management was one of the top holders of SAP SE (NYSE:SAP) among the funds we track with a holding of over 8.6 million shares.
9. Novartis AG (NYSE:NVS)
Dividend Yield as of 10/24: 4.28%
Number of Hedge Fund Holders: 22
Novartis AG (NYSE:NVS) is a pharmaceutical giant whose shares yield around 4.28% as of 10/24. Given analysts have a price target of $102 per share and the stock has a considerable pipeline with over 150 projects in clinical development, Novartis AG (NYSE:NVS) has a lot of potential.
In terms of the future, Novartis AG (NYSE:NVS) expects 4% sales CAGR through 2027. Renaissance Technologies owned over 3.78 million shares at the end of Q2 2022.
8. Stanley Black & Decker, Inc. (NYSE:SWK)
Dividend Yield as of 10/24: 4.21%
Number of Hedge Fund Holders: 32
Stanley Black & Decker, Inc. (NYSE:SWK) is down almost 60% year to date as higher interest rates have cooled the housing market. A weaker market and potentially softer industrial markets have also been headwinds for Stanley Black & Decker, Inc. (NYSE:SWK) shares.
As a result of the decline, Stanley Black & Decker, Inc. (NYSE:SWK) is a dividend stock with a dividend yield of 4.21%. Analysts have an average price target of $102.15 per share.
7. Equinix, Inc. (NASDAQ:EQIX)
Dividend Yield as of 10/24: 2.33%
Number of Hedge Fund Holders: 38
Equinix, Inc. (NASDAQ:EQIX) shares have fallen 37% year to date as higher Treasury yields have made the company's 2.33% dividend yield as of 10/24 less attractive to some investors. Nevertheless, analysts have an average price target of $732.41 per share and Equinix, Inc. (NASDAQ:EQIX) still has a lot of growth potential left.
Baron Real Estate Income Fund commented on Equinix, Inc. (NASDAQ:EQIX) in its Q2 2022 investor letter:
“Equinix, Inc. is a network dense global data operator of over 240 data centers in 69 metros and 30 countries. Its customers place high value on the ecosystem of customers that Equinix has curated within its data centers over many years so that they are able to interconnect within the data center facility instead of having data travel through the public internet (latency sensitive applications as well as data security considerations). Customers value the global network with 90% of customers in multiple metropolitan areas and 75% in multiple geographic regions. Equinix has a diverse but valuable customer base with no single customer greater than 2.6% of recurring monthly revenues. COVID-19 has accelerated digital transformation priorities for many organizations, and we believe that Equinix will be poised to benefit from: i) organic growth through new bookings and pricing power (the majority of incremental bookings are from existing customers); ii) growth of high margin cross-connect revenue (approximately 20% of total); and iii) continued geographic expansion through development and select M&A. We believe the combination of these factors will allow the company to grow annual cash flow in the high single digit range.”
6. AstraZeneca plc (NYSE:AZN)
Dividend Yield as of 10/24: 3.44%
Number of Hedge Fund Holders: 47
Although its shares are down 5.3% year to date due to the weaker market, AstraZeneca plc (NYSE:AZN) stock has performed well in the long run with shares more than doubling from the beginning of 2012. With a dividend yield of 3.44% as of 10/24 and an average analyst price target of $71.9, AstraZeneca plc (NYSE:AZN) is arguably a value dividend stock.
Like AstraZeneca plc (NYSE:AZN), American Tower Corporation (NYSE:AMT), Lowe's Companies, Inc. (NYSE:LOW), and NXP Semiconductors N.V. (NASDAQ:NXPI) are all quality dividend stocks that many hedge funds in our database owned at the end of Q2 2022.
Click to continue reading and see 5 Best Value Dividend Stocks To Buy.
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Disclosure: None. 12 Best Value Dividend Stocks To Buy is originally published on Insider Monkey.
