As we navigate through the third quarter of 2024, the market is emerging from a period of significant gains. Over the past few months, a bullish rally has propelled tech stocks to new heights, leaving dividend stocks in the shadows. Yet, a recent shift in investor sentiment is becoming apparent. There is a growing trend of selling off overvalued tech stocks in favor of undervalued small caps and reliable dividend payers. This shift could mark the start of a broader rotation, presenting a timely opportunity to invest in dividend stocks that remain attractively priced.
In this article, I have gathered three dividend stocks offering compelling value at their current price levels. To ensure we are talking about quality names, I have chosen names that stand out due to their impressive records of dividend growth. Each has consistently increased its payouts for at least 20 years. Moreover, their dividend per share compound annual growth rate (CAGR) over the past decade stands above 10%, ensuring their income growth has comfortably outpaced inflation.
Whether you’re aiming to shield your portfolio against a potential shift away from growth as we move deeper into Q3 or seeking stocks with a solid history of increasing dividends, these three picks deserve your attention.
Northrop Grumman (NYSE:NOC)
If you are looking for a beaten-down, quality dividend with an excellent track record, then you can’t overlook Northrop Grumman (NYSE:NOC). Recognized for its cutting-edge aerospace and defense technologies, the company is the force behind iconic systems like the B-2 Spirit stealth bomber, Global Hawk unmanned surveillance aircraft, and the F-35 Lightning II fighter jet.
Northrop Grumman’s aircraft and weapons systems have been indispensable to both the U.S. and its Allies, contributing to consistent earnings and dividend growth for over two decades. The company features a superb track record of increasing its dividend for 20 consecutive years. Further, dividend hikes have been at very attractive rates even lately, with the company’s dividend per share growing at an impressive CAGR of 11.9% over the past decade.
Despite the stock’s 7% decline year-to-date against the broader market gains, Northrop Grumman continues to form a compelling investment case. Its positioning in today’s volatile geopolitical climate, marked by increased global defense expenditures due to rising tensions and conflicts worldwide, certainly bolsters its attractiveness. While the 1.8% dividend yield might not seem substantial, there is ample room for payouts to keep growing rapidly, especially given the favorable defense industry environment.
J.B. Hunt Transportation Services (JBHT)
The second dividend stock worth buying in Q3 on my list is J.B. Hunt Transportation Services (NASDAQ:JBHT). Specializing in integrated supply chain solutions, J.B. Hunt offers truckload, intermodal, and dedicated contract services. Its strategic advantage is rooted in an expansive network of 118,171 company-owned pieces of trailing equipment systemwide, enhancing efficiency in route planning and fleet management.
J.B. Hunt’s competitive edge is significantly reinforced by its expansive scale and enduring client relationships, which have supported continuous revenue growth and profitability. Notably, the company has raised its dividend for 21 consecutive years, underscoring its sustained success and consistent earnings growth course. Further, J.B. Hunt boasts a 10-year CAGR of 10.8% in dividend payouts, highlighting its equally strong EPS growth trajectory over the same period.
With shares having declined by about 14% over the past year, J.B. Hunt stock has formed a compelling opportunity as we traverse Q3. Some short-term volatility is likely to persist. In fact, EPS is expected to drop by 18% this year due to headwinds in the logistics industry. Yet, with Wall Street expecting EPS to rebound in FY2025, followed by double-digit growth in the medium term, J.B. Hunt is undoubtedly worth your attention today.
Hormel Foods (HRL)
Last but not least, Hormel Foods (NYSE:HRL) is another excellent dividend stock to consider this quarter. Specializing in a diverse array of food products, Hormel operates through several segments, including refrigerated foods and grocery products. Its portfolio features iconic brands like SPAM, Skippy, Hormel Black Label, and Applegate, catering to a wide range of consumer preferences and dietary needs.
Hormel’s comprehensive distribution network, solid retail relationships, and the fact that food products tend to generate rather resilient sales irrespective of market conditions have allowed the company to grow its revenues and earnings rather consistently historically. In fact, the company’s dividend per share has grown at a CAGR of 12.5% over the past ten years, while Hormel boasts 58 years of consecutive dividend increases.
Hormel Foods’ stock has declined 18% over the past year, driving its yield up to 3.3%. In my view, this yield provides a decent level of income, especially given Hormel’s ongoing rapid dividend growth. With potential interest rate cuts in the near future, investors are likely to favor dependable dividend-paying stocks like Hormel. This positions Hormel favorably, as investors will likely pivot to reliable dividend names amid the absence of yield in fixed-income investments, translating to another possible tailwind.
On the date of publication, Nikolaos Sismanis did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.