With Black Friday and Christmas shopping (hopefully) behind us, you’d think getting bargains will have to wait until the next discount season. Well, I have good news for you: the stock market is often filled with bargains at any time of the year, as long as you know where to look. Finding them is easy with tools like Barchart's Stock Screener, which makes the job easier!
Let me show you how I found three bargain Dividend Kings—one of my favorite kinds of income stocks—for you to consider today.
How I Came Up With The Following Stocks
So, I start on Barchart Screener, then use the following filters:
- Current Analyst Rating: 4.5 to 5 (Strong Buy). With this filter and value set, I’ll get results that Wall Street considers some of the most promising stocks for the next 12 months. So, I say, why not start the year with a winner?
- P/E Ratio TTM (trailing twelve months): 30 and below. The price-to-earnings ratio is a fundamental metric that measures how expensive the stock is compared to the company’s earnings. The lower the P/E, the cheaper the stock. The current S&P 500 P/E is 27.87, so I'll want values below that.
- Annual Dividend Yield: I usually leave this blank so I can see them on the results page and have the option to arrange them accordingly.
- Watchlists: Kings. I keep a few watchlists on my Barchart account, which I’ve found useful when I want to screen through specific stock groups or indexes. (Bonus tip: Making watchlists is as easy as copying a list of stocks you want to be added [separated by spaces or commas] and then pasting it onto a field. Literally a two-minute effort.)
After setting the filters, I clicked on See Results and then got five hits. Of those five, I took the top three with the lowest P/E ratio.
Here are the top three Dividend Kings trading at a bargain, starting with the one with the lowest P/E:
Tennant Company (TNC)
P/E TTM: 11.55
P/E Forward: 12.49
Industrials Sector P/E Forward: 26.61
Tennant Company, one of the world’s leading cleaning solutions providers, had a rough year, as share prices peaked in April and then slid all the way down to $80. Most investors point to deteriorating financial performance as the cause of the bearish price movement, with Q3 2024, in particular, reporting a 9.2% decrease in net income.
While that doesn't look good at face value, the reported bottom line actually exceeded analyst estimates by a few points, potentially meaning that the market has priced in the poor performance over the last few quarters. Indeed, financial research firm Northcoast indicates TNC’s current trading price as an “attractive entry point” for interested investors.
If you do buy TNC, you could expect a $1.18 annual dividend, which translates to a 1.47% yield. And, if history is to repeat itself, investors can expect annual increases as the Tennant Company has also increased dividends for 53 years straight.
Becton Dickinson and Company (BDX)
P/E TTM: 17.30
P/E Forward: 15.78
Healthcare Sector P/E Forward: 32.89
With the SEC investigation done and optimistic forecasts for both top and bottom lines, Becton Dickinson and Company seems to be in for a great year. The global medical technology company has increased dividends for 53 consecutive years, with its latest increase clocking in at 9.5%. Its annual rate is $4.16, reflecting a 1.84% yield based on current prices.
BDX stock is also quite cheap at 17x P/E compared to the healthcare sector at 33x, so investors might want to take this opportunity to snag this Dividend King at a discount.
Coca-Cola Company (KO)
P/E TTM: 22.18
P/E Forward: 21.92
Healthcare Sector P/E Forward: 23.33
Warren Buffett famously invested in KO stock when it was cheap and is now getting an insane yield on his investment. Regardless, investors can still buy the stock at relatively low prices. Though its P/E ratio is close to the industry average, KO stock's 52-week price range of $57.93-$73.53 indicates that it may be a potential bargain.
To be sure, analysts peg KO stock with a $85.00 high target price, representing a 36% potential return from yesterdays close. Meanwhile, Coca-Cola’s dividends remain excellent, with the current annual rate at $1.94 a year, reflecting a 3.11% yield—the highest on this list.
Final Thoughts
Buying Dividend Kings when they are cheap is one of my favorite long-term investment strategies I can recommend. Though it can be tough to find such opportunities (as Dividend Kings are mature companies that don’t often experience significant price changes), keeping an eye out for bargains can potentially boost both your returns and your dividend income for years to come.
