2 Undervalued Dividend Stocks the Best Managers Are Buying

Some top concentrated fund managers bought these cheap dividend stocks trading at big discounts.

Susan Dziubinski 3 July, 2024 | 4:16AM
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Two rising stock chartsDividend stock investors, listen up: Today, we’re talking about two dividend-paying stocks some of the best money managers have been buying. And both of these stocks are trading at big discounts to Morningstar’s fair value estimates.

2 Undervalued Dividend Stocks the Best Managers Are Buying

  1. Realty Income O
  2. Kenvue KVUE


Realty Income O

Analyst: Kevin Brown, CFA

The first undervalued dividend stock purchased by some of the best managers recently was Realty Income O. Realty Income is the largest triple-net REIT in the United States, with more than 13,000 properties housing retail tenants who are responsible for paying all property expenses including real estate taxes, maintenance, and building insurance. Realty Income calls itself “The Monthly Dividend Company,” and Morningstar thinks this REIT offers one of the most stable sources of income for investors. Realty Income currently offers a forward dividend yield well above 5%. We also expect that the company will be able to continue to grow its dividend each year. In fact, Realty Income is considered a dividend aristocrat, which means it has raised its dividend for at least 25 consecutive years. We think shares of this REIT are worth US$76, and they’re trading at a big discount to that fair value estimate.

Kenvue KVUE

Analyst: Keonhee Kim

The second undervalued dividend stock purchased by some of the best managers recently was Kenvue KVUE. Formerly known as Johnson & Johnson’s consumer segment, Kenvue spun off and went public in May 2023. Its portfolio includes well-known brands such as Tylenol, Listerine, Aveeno, and Neutrogena. Despite playing in a fragmented industry with intense competition and ever-changing consumer preferences, many of Kenvue’s brands are the global leaders in their respective segment, thanks to their strong brand power. Morningstar thinks Kenvue possesses a wide economic moat that should allow the company to remain competitive for 20 years or more. Kenvue’s forward dividend yield tops 4%, and the stock trades well below our fair value estimate of US$25.50.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Kenvue Inc18.25 USD-0.38Rating
Realty Income Corp57.58 USD-0.26Rating

About Author

Susan Dziubinski

Susan Dziubinski  is director of content for Morningstar.com.

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