We recently compiled a list of 10 Best Dividend Aristocrats According to Wall Street Analysts. In this article we are going to take a look at where Dover Corporation (NYSE:DOV) stands against the other dividend aristocrats.

Shifts in investment trends have revealed new insights for investors in recent years. Certain times call for specific investments, and it’s often experienced investors who can spot these opportunities. However, it’s clear that the value of a good investment remains steady, even amidst ongoing changes. This is where the long-standing dividend aristocrats play a role. These companies are strong dividend payers, having raised their payouts for at least 25 consecutive years.

The extended periods of dividend increases have significantly boosted the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with lower volatility, according to a report by ProShares. In addition, these stocks demonstrated strong performance in all market conditions, capturing 90% of market gains while only experiencing 82% of market declines. Also read: 10 Best Dividend Aristocrats with Over 3% Yield.

Achieving 25 consecutive years of dividend growth is quite an accomplishment. Out of approximately 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats index in 2024. This highlights that only a small number of companies have reached this milestone. Maintaining a record of annual dividend increases for 25 years means the company has managed to boost shareholder payouts through various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined management of capital. Even dividend aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M were unable to sustain their decades-long dividend growth streaks and have been removed from the Dividend Aristocrats club this year. This highlights the importance of financial strength for dividend aristocrats. The Great Financial Crisis exposed the financial vulnerabilities of these dividend-growers, as 17 out of the 60 Aristocrats in the S&P 500 were removed in 2008 and 2009.

As mentioned before, dividend aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, a senior managing director and portfolio manager at Wellington Management, has noted this performance, particularly with the Vanguard Dividend Growth fund, which he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 market crash, while the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount, thanks to its dividend-generating stocks. As the market recovered, the fund quickly made up for its losses, outperforming many of its peers. Kilbride further mentioned that dividend growth is crucial for weathering tough markets and achieving long-term success, stating that its benefits are substantial and enduring.

According to analysts, for those building their portfolios, incorporating dividend investments can be beneficial, particularly if the dividends are reinvested. By using dividends to purchase additional shares each time they are received, investors create a cycle where payouts increase with the number of shares owned, leading to the ability to acquire even more shares. In this article, we will take a look at some of the best dividend aristocrat stocks according to analysts.

Our Methodology:

For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of August 7. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

A modern industrial equipment assembly line in motion.

Dover Corporation (NYSE:DOV)

Analyst Upside Potential as of August 7: 13.5%

Dover Corporation (NYSE:DOV) is an Illinois-based manufacturer of industrial products that offers a diverse range of innovative equipment and components. On August 5, the company declared a 1% hike in its quarterly dividend to $0.515 per share. Through this increase, the company stretched its dividend growth streak to 68 years, which makes DOV one of the best dividend aristocrat stocks on our list. The stock’s dividend yield on August 7 came in at 1.18%.

The industrial sector is facing persistent macroeconomic challenges, including tight monetary policies. In July, a gauge of U.S. manufacturing activity fell to an eight-month low due to a decline in new orders. However, this drop may overstate the industry’s difficulties, as factory production saw a strong rebound in the second quarter. The Institute for Supply Management (ISM) reported on Thursday that its manufacturing PMI fell to 46.8 last month, the lowest level since November, down from 48.5 in June. A PMI reading below 50 signals contraction in the manufacturing sector, which represents 10.3% of the economy.

In this economic climate, Dover Corporation (NYSE:DOV) held up better than its peers, which is reflected in its recent quarterly earnings. The company’s results for the second quarter were solid, thanks to excellent production performance and strong shipment rates for received orders. The volume strength was widespread across the portfolio, with four out of five operating segments showing top-line growth. Margin expansion was significant during this period, driven by prior portfolio additions. The company completed two strategic bolt-on acquisitions that strengthened its clean energy components platform, adding applications in attractive end markets and expanding its global presence and manufacturing capabilities. In addition, Dover announced the divestiture of its Environmental Solutions Group business unit, reducing its exposure to capital goods as it continues to shift its portfolio towards high-margin priority platforms.

Dover Corporation (NYSE:DOV)’s cash generation is also strong, which makes it a solid dividend payer. In the second quarter of 2024, the company generated an operating cash flow of $203.6 million, up from $166.6 million in the previous quarter. Its free cash flow grew from $122 million in the preceding quarter to $163 million.

Dover Corporation (NYSE:DOV) was a part of 28 hedge fund portfolios at the end of Q1 2024, growing from 21 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $836.7 million. With over 1.6 million shares, Fisher Asset Management was the company’s leading stakeholder in Q1.

Overall DOV ranks 8th on our list of the best dividend aristocrats to buy according to Wall Street Analysts. While we acknowledge the potential of DOV as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than DOV but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.