5 Dividend Growth Stocks With Upside To Analyst Targets

An analysis of the SPDR S&P Dividend ETF has identified five 'Dividend Aristocrat' stocks—Colgate-Palmolive (CL), Flowers Foods (FLO), ABM Industries (ABM), Lancaster Colony Corp (LANC), and Southern Company (SO)—that offer substantial upside to average analyst 12-month target prices, ranging from 12.56% to 14.01%. Despite these consistently dividend-growing companies often being fully priced, these specific selections present a compelling investment case, with implied total return potential between 14.79% and 18.27% when factoring in current dividend yields, suggesting an opportunity for both capital appreciation and stable income.

Analysis

An analysis of the S&P High Yield Dividend Aristocrats Index has identified five constituents that exhibit notable upside potential relative to consensus analyst price targets, a condition not typically associated with these often fully-priced, high-quality equities. The identified companies—Colgate-Palmolive (CL), Flowers Foods (FLO), ABM Industries (ABM), Lancaster Colony (LANC), and Southern Company (SO)—show potential capital appreciation ranging from 12.56% to 14.01% based on average 12-month analyst targets. When current dividend yields are included, the implied total return potential is more pronounced, ranging from 14.79% for LANC to 18.27% for FLO. This dual-return profile is further supported by consistent, albeit varied, dividend growth, with trailing twelve-month (TTM) dividend growth rates spanning from 2.27% for ABM to a more robust 5.80% for LANC. The data suggests a potential dislocation between the market's current pricing of these stable income stocks and their forward-looking growth and return prospects as viewed by sell-side research.

Key Decisions for Investors

• Investors seeking total return should consider these five Dividend Aristocrats, which offer a compelling combination of potential double-digit capital appreciation and stable, growing dividend income.
• For portfolios emphasizing yield and total return, Flowers Foods (FLO) warrants specific attention due to its highest implied total return of 18.27%, which is heavily supported by a 4.71% dividend yield.
• Investors prioritizing dividend growth as a primary factor should further investigate Lancaster Colony (LANC), which demonstrated the strongest recent dividend increase at 5.80% TTM.
• The investment thesis is contingent on analyst price targets being met, so it is prudent to scrutinize the underlying assumptions in the sell-side research for each specific company before initiating or adding to a position.