As an income investor, I'm always on the hunt for relatively affordable dividend stocks - or, shall I say, undervalued. Dividend growth investors, like me, aren’t usually interested in the stock’s current yield alone - rather, they look for companies that raise their dividends year after year - and that’s where the Dividend Aristocrats come in. The Aristocrats are an elite group of S&P 500 listed companies with a track record of increasing their dividends for at least the last 25 consecutive years. The key, however, is that like any other investment, when you buy is just as important as what you’re buying.

With the market sentiment moving lower, several Dividend Aristocrats have become undervalued, and caught my attention. 

How I Came Up With The Following Stocks

For this analysis, I used my stock screener to look for Dividend Aristocrats and set the following filters:

• Watchlist: Dividend Aristocrats - my own premade watchlist.
• P/E ratio: I also left this blank since the P/E ratios for each company are relative to its broader industry P/E.
• Number of analysts: I opted for eight or more analysts covering the stock. The more the analysts, the better.
• Analyst Rating: I set the rating to 3.5 and above to get those with moderate to strong buy ratings.
• Div. Yield: I left it blank to sort the results by yield.

After hitting “See Results”, 47 companies came up. Then, I sorted them out from highest to lowest dividend yield, as shown below:

The first three companies on the list were Amcor Plc (AMCR), Chevron Corp (CVX), and Federal Realty Investment Trust (FRT). However, I skipped Chevron Corp due to its P/E ratio of 15.71, above the sector average of 8.87, which tells me that CVX stock isn’t exactly undervalued - it would defeat the purpose of this analysis. That leaves us with Amcor Plc, Federal Realty Investment Trust, and Stanley Black & Decker as my top 3 undervalued Dividend Aristocrats to buy right now.

Amcor Plc (AMCR)

Amcor plc is a packaging solution company that produces flexible films and rigid containers, primarily serving food and healthcare companies with customizable solutions, such as specialized packaging that protects everything from soft drinks to medical supplies, which are developed from its network of subsidiaries. 

Amcor's Q2'25 financials were mixed but generally positive. Revenue decreased by 0.31% to $3.24 billion, while operating income jumped 22.73% to $297 million. The company’s bottom line also rose with its operating income, 22.79% to $167 million thanks to input cost reductions resulting in a profit bump despite slightly declining revenue. 

In terms of the company’s dividends, Amcor is the most attractive target on this list. Its forward annual dividend is $0.505 per share, which translates to a yield of 5%, and represents 70.58% of the company’s earnings.  

Wall Street analysts have a consensus is a buy rating (4.5 out of 5) on AMCR stock, with a high target of $12.50 in the next 12 months - implying a potential 24.2% gain.

Perhaps most importantly, however, is Amcor’s upcoming merger with Berry Global. This merger should create one of the largest packaging companies in the world, and once complete, the combined company should be able to save $650 million on a combined $3 billion in annual cash flow. 

Federal Realty Investment Trust (FRT)

Next up is Federal Realty Investment Trust. This Dividend Aristocrat is a REIT with over 100 properties, comprising grocery-anchored retail shops and mixed-use developments where you can work or live. Federal Realty has ~3,500 tenants in 27 million commercial square feet and around 3,100 residential units. 

Federal Realty is an attractive choice for income-focused investors like myself as they’ve increased their quarterly dividend for 57 consecutive years. At the moment, its forward annual dividend of $4.40 translates to a 4.23% yield.

Analyst sentiment is also quite optimistic on FRT stock, with a consensus strong buy rating (4.44 out of 5) from 16 analysts. The high price target for this Dividend Aristocrat is $135 per share, which highlights its undervalued status, implying ~30% upside potential from its current levels. 

Stanley Black & Decker (SWK)

The last, but not least undervalued Dividend Aristocrat on my list is a company that many DIY’ers like myself love – Stanley Black & Decker. The company manufactures products under several names including Craftsman, Stanley, Black + Decker, Hustler, and more. 

Stanley Black & Decker's Q4’24 financials reported revenue of $3.72 billion, down 0.43% year-over-year. Its operating income, up $198 million year-over-year, stood out, primarily driven by the absence of asset impairment charges that previously cost the company $150.8 million. 

In terms of dividends, like Federal Realty, Stanley Black & Decker has an impressive 57-year streak of dividend increases, which highlights management’s commitment to shareholders. The company pays a forward dividend of $3.28, translating to a 3.83% yield.

Analyst sentiment is also optimistic with a consensus moderate buy rating (3.5 out of 5) from 16 analysts and a high price target of $120, which implies a potential 37% upside from the stock’s current trading price.  

Final Thoughts on Buying Undervalued Dividend Aristocrats

Over the long term, income investing helps me sleep better at night as the dividends distract me from the day-to-day market drama. Not only that, with each of the company's history in increasing their distributions, their strong financials, and analyst rating speak for themselves: these three Dividend Aristocrats are undervalued.

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.