When it comes to investing, Dividend Aristocrats have a special appeal. These are companies in the S&P 500 Index ($SPX) that have consistently increased their dividends for at least 25 years, demonstrating strong financial stability and a commitment to rewarding shareholders. Currently, two of these renowned companies, The JM Smucker Company (SJM) and Target Corporation (TGT), appear to offer particularly attractive investment opportunities.
SJM and TGT are no newcomers to their industries and offer consistent dividends with significant growth potential. Additionally, they currently trade below their average price targets and have P/E ratios that are lower than the typical company in their industries.
For investors who value good value or are just looking for income, this is a rare opportunity to snap up shares of these blue-chip companies while they’re still on sale. So let’s take a closer look at why it might be worth adding these two Dividend Aristocrats to your portfolio before prices start rising again.
The J.M. Smucker Company
The JM Smucker Company (SJM) has been around since 1897 and is a major player in the food and beverage industry. The company has some pretty well-known brands under its belt, such as Smucker’s, Jif, and Folgers, which have helped it make a name for itself in the world of consumer goods.
SJM stock is currently trading just below the $120 mark. Despite underperforming last year (down 17.4%) and year-to-date (down 5.5%), it is now on the upswing. In fact, the stock has gained more than 13% since its low in late June.
With a market cap of $12.71 billion, the packaged food giant still has some very attractive valuation numbers. Notably, Smuckers is valued at a price-to-earnings (P/E) ratio of 11.93, which is well below the sector’s average P/E of 17.54. This suggests that the company may be undervalued compared to its peers and represents a promising investment opportunity.
One thing that really stands out about SJM is its commitment to keeping shareholders happy. They have increased their dividend for 27 consecutive years and just recently increased their payout by another 2% from $1.06 to $1.08 per share. And with an annual dividend yield of 3.61%, investors can expect a payout that beats the S&P average. The company’s strong cash flow generation means it can continue to invest in growth while rewarding shareholders.
In its most recent earnings report, SJM reported quarterly revenue of $2.2 billion, down slightly by 1% from a year ago. However, excluding the impact of acquisitions, divestitures and foreign currency, revenue increased 3%. The company saw strong demand across all segments, particularly pet food and coffee, but also had to contend with higher costs due to inflation.
Despite these challenges, adjusted earnings per share increased by 1% to $2.66. Looking ahead, SJM forecasts fairly solid growth. Net sales are expected to increase by 9.5% to 10.5% in fiscal 2025, and adjusted earnings per share will be somewhere between $9.80 and $10.20.
SJM has made smart moves recently, such as expanding its partnership with Acosta Group to strengthen its sales and marketing presence in North America. This should help the company strengthen its position in the market and drive growth through multiple channels. And the recent 2% dividend increase clearly shows that SJM is committed to continuing to create value for shareholders.
Analysts are optimistic about SJM, giving the stock an overall “moderate buy” rating and an average price target of $128.33. Of the 13 analysts covering the stock, five call it a “strong buy,” while eight recommend a “hold.”
Target company
Target (TGT) is a leading name in retail, known for selling everything from clothing and electronics to groceries and home goods. The company’s recipe for success is brick-and-mortar stores and a strong online presence designed to make shopping easier for customers.
Over the past year, TGT has shown some bite, recovering from its October 52-week low of $102.93 to post a gain of more than 13%. Sure, 2024 has been a bumpy ride, with the stock down slightly year-to-date, but that just means there could be a chance for investors to snap up some shares at a bargain price.
With a market capitalization of around $62.8 billion and a P/E ratio of 14.54 – a decent discount to the sector’s average P/E of 17.54 – TGT appears to be undervalued.
Another thing that makes TGT quite attractive is its juicy annual dividend yield of 4.40%. The company just increased its quarterly dividend to $1.12, marking an impressive 53 consecutive years of dividend growth – making it not just a Dividend Aristocrat, but a Dividend King.
In its most recent earnings report, Target reported total revenue of $24.5 billion, down 3.1 percent from a year ago, primarily due to lower sales volume. The company’s adjusted earnings per share for the first quarter were $2.03, just below forecasts.
Looking ahead, Target expects comparable sales to be flat or up as much as 2% for the year, with earnings per share coming in somewhere between $8.60 and $9.60. The company’s next earnings report is scheduled to be released before the market opens on August 21, so investors should be aware of the possibility of short-term volatility in TGT shares related to that event.
Target has been making smart moves lately, like partnering with Shopify (SHOP) to expand its Target Plus online marketplace with a hand-picked selection of new brands and products. They’re also rolling out a new AI tool called Store Companion across all of their stores to increase efficiency and make shopping even more enjoyable for customers.
Analysts are overall bullish on TGT, with most giving the stock a “moderate buy” rating. Of the 31 analysts covering the stock, 16 say it is a “strong buy,” 3 call it a “moderate buy,” 11 recommend a “hold,” and just one considers it a “strong sell.” The average price target is $173.30, suggesting the stock could rise about 22% from its current price.
Diploma
In a market where top-quality stocks seem to rarely go on sale, both The JM Smucker Company and Target Corporation offer some interesting opportunities for value investors. With their strong brand portfolios, consistent dividend growth, and strategic initiatives geared toward future success, these stocks offer a compelling mix of value and upside potential. Now is the time to add these reliable income producers to your portfolio while they’re still trading at a discount.
On the date of publication, Ebube Jones had no position (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see Barchart’s disclosure policy here.
