2 Dividend Aristocrats to Buy Before 2024

Susan Dziubinski: Hi. I’m Susan Dziubinski with Morningstar. Dividend Aristocrats are companies that have raised their dividends for at least 25 consecutive years. In order to support this type of annual dividend growth, these companies typically maintain competitive advantages and healthy balance sheets. And because of their reliable dividend growth patterns, the stocks of these companies often trade at or above what they’re actually worth. That’s because investors are willing to pay up for such dependable dividend growth.

But today, we’re looking at two Dividend Aristocrats whose stocks are trading well below what Morningstar thinks they’re worth—put another way, these stocks are trading at rare and significant discounts to our fair value estimates. Given that these stocks don’t often trade below their fair values, investors have a rare—and perhaps brief—opportunity to pick up these Dividend Aristocrats on sale.

2 Dividend Aristocrats to Buy Before 2024

1. Clorox CLX
2. NextEra Energy NEE

The first cheap Dividend Aristocrat on our list today is Clorox CLX. Clorox maintains a presence in a variety of consumer products categories, with brands that include its namesake, Liquid-Plumr, Pine-Sol, S.O.S, Kingsford, Glad, Hidden Valley, and Burt’s Bees, among others. Even though it faces competition from private-label offerings, around 80% of Clorox’s U.S. sales are from brands that are number one or two in their categories. However, because of a recent cybersecurity breach that drove operations temporarily offline, Clorox is taking a sales and profit hit to start off its fiscal 2024. But we think this issue is transitory and that dividend growth will continue. We think Clorox stock is a bargain today.

Our second Dividend Aristocrat on sale is NextEra Energy NEE. We think that NextEra’s high-quality regulated utility in Florida and its fast-growing renewable energy business give investors a secure dividend and industry-leading renewable energy growth potential. Now, as interest rates have risen, investors have soured on utilities stocks. As a result, utilities like NextEra are trading at discounts to our fair values that we haven’t seen since 2009. At its current price, NextEra Energy is a Dividend Aristocrat that’s a rare buy.

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Morningstar director Erin Lash and strategist Andy Bischof provided the research behind this segment.

Watch “3 Cheap International Stocks to Buy” for more from Susan Dziubinski.