3 Cheap Dividend Aristocrats to Buy Before It's Too Late

Let's face it: finding bargain stocks is difficult. You never know if they are already at the bottom when you pick them up or just pausing for another leg of the downturn. The good thing is that some tools help you assess the prices at their exhaustion points. For example, the 14-day RSI allows investors to see if stocks have moved to the extreme side of the selling pressure, often called "Oversold," and may start slowing down. This condition allows investors to quickly see which stocks have the potential to find a bottom and recover. 

Combine this with high-quality stocks like Dividend Aristocrats—long-term investment royalties with decades-long histories of increasing their dividends —and you might get a sweet combination. If that sounds good to you, you’re in luck. Here are three oversold Dividend Aristocrats.

C.H. Robinson Worldwide, Inc. (CHRW)

14-day RSI:29.08

Suppose you require a solution for your logistics problems. In that case, the first thing that comes into mind is the industry giant C.H. Robinson Worldwide, Inc. CHRW is a global logistics company offering its customers transportation brokerage and forwarding services. Its forwarding services include ocean & air freight services and customs brokerage through its international network of offices globally. The company recently announced adding automation features to improve freight shipping efficiency. The technology helps lighten the appointment process, commonly done through emails and phone calls. 

According to its latest financials, gross profits fell by 20.0% YoY, income from operations declined by 34.5% YoY, and adjusted operating margin decreased by 400 basis points to 17.4% for the entire year of 2023. 

Despite the contraction in its margins and slowdown in performance, the company still dominates the asset-light truck market. It also has an economic moat with its vast network of shippers and truckers. CEO Dave Bozeman expressed optimism toward its future and their efforts to streamline processes and improve operational efficiency. This leads us to believe that this decline may be short-term, making this an excellent opportunity to start picking up CHRW shares.

CHRW recently announced a $0.61 dividend payable on April 1, 2024, representing a dividend yield of 3.30%.

3M Company (MMM)

14-day RSI:34.44

3M Company is one of the most popular companies and a frequent haven for dividend investors. It is known for its masking tapes, painter’s tape, other adhesives, face masks, and diversified portfolio of products. Operations are mainly in four key segments: transportation & electronics for its automotive, aerospace, and electronic solutions; consumer for its home, office, and home improvement products; health care for its medical solutions, and separation &puriification sciences; safety & industrial for its abrasives, industrial adhesive & tapes, and automotive aftermarket. 

The company’s modal AI-powered technology radiology speech reporting solution is again honored as the #1 Best in KLAS award for the third consecutive year, highlighting its strong product portfolio and ability to innovate. 

While 3M’s recent legal issues will affect financials, investors should remember that the company is a well-known innovator with an especially strong history of successful R&D. In addition, its reputation as a reliable brand allows it to benefit from its premium product pricing, which can help cover unit costs and fund its operations and dividends. 

The company currently offers an annual dividend rate of $6.00, representing a yield of 6.49%.

Leggett & Platt, Incorporated (LEG)

14-day RSI:24.85

If you enjoy a good night's sleep, then Leggett & Platt, Incorporated may be familiar. The company is well known for its ComfortCore® innerspring and bedding components technology. LEG operates in segments: flooring & textile products for its residential and work furniture manufacturing; specialized products for its lumbar support, seat suspension systems, and more; and bedding products for its mattresses and bedding brands. 

LEG previously announced a restructuring plan to optimize the company’s profitability. It plans to enhance manufacturing and distribution efficiency and expand product strategies for the bedding products segment. 

Sales fell 7% YoY and reached $1.10 billion for 4Q23. Furthermore, the company experienced a substantial decline after its recent full-year guidance, which suggested another potential contraction. Earnings are expected to dip to $1.05-$1.35 for FY’24, lower than its current annual dividend. 

Naturally, this “bad news” ignited concerns about the company’s ability to continue increasing its dividend payouts. An adverse reaction is understandable; however, many things can happen in a year. LEG still has a chance to pull through if headwinds in the steel market ease up or the year yields a better-than-expected macro environment. 

Investors remaining optimistic about LEG might not have a better chance of picking up shares at a steep discount. However, this is a highly speculative play; anyone willing to take the risk must have a solid exit strategy in place. Leggett & Platt currently pays an annual dividend of $1.82, representing a yield of 9.14%.

Final Thoughts

Oversold conditions allow investors to buy stocks at depressed price levels and maximize the upside and dividend yield potential of dividend stocks. However, we must remember that oversold conditions only tell you where to look. Due diligence and proper timing strategies are needed to minimize the risk for every position taken.

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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.