3 Quality Dividend Stocks You Don't Know About

Dividend stocks come in all shapes and sizes. While the mega-cap dividend payers like Microsoft MSFT and Johnson & Johnson JNJ get most of the attention in the financial media, there are many smaller dividend stocks that don’t get much time in the spotlight.

There are many under-the-radar hidden gems that can be found among dividend stocks. Let's discuss three lesser-known dividend names you probably have not read much about, but offer high dividend yields and potential for strong returns.

Unknown Dividend Stock #1

The Interpublic Group of Companies IPG provides advertising and marketing services worldwide. Its operations are well diversified among consumer advertising, digital marketing, communications planning, media buying, and data management services. The company generates close to $11 billion in annual revenue.

For the 2024 first quarter, net revenues rose by 0.3% to $2.18 billion compared to last year. This was derived from a positive 0.1% impact from currency translation and 1.3% organic growth, partially offset by the impact of net dispositions of negative 1.1%. Net income came in at $110.4 million against $126.0 million in the prior-year period. This decline was mainly due to higher cost of services and higher SG&A expenses, resulting in operating income declining by 2.2% to $184.2 million.

During the quarter, the company repurchased $62.4 million worth of stock, which slightly aided EPS. Still EPS fell from $0.33 to $0.29. Looking ahead, management remains confident in the foundational strengths of the company. For 2024, IPG expects organic revenue growth of 1% to 2%. The adjusted EBITA margin target remains at 16.6%.

To reflect the international segment’s strong growth, the ongoing margin expansion, and the ongoing, substantial share buybacks, we retain our EPS growth estimates at 7%. Embedding digital elements across the portfolio and adding a layer of data and tech to its offerings should also contribute positively to earnings.

Further, IPG’s buybacks have resulted in the company retiring more than 10% of its outstanding shares over the past decade, and nearly 22% of their shares since 2011. Share buybacks should continue to lower the share count moving forward, as the board gave the green light to an additional share repurchase authorization of $320 million two quarters ago.

IPG has increased its dividend for 13 consecutive years. The company has a projected dividend payout ratio of 46% for 2024, indicating a secure dividend payout.

IPG shares currently yield 4.1%.

Unknown Dividend Stock #2

Perrigo’s PRGO history goes all the way back to 1887 when Luther Perrigo, the proprietor of a general store and apple-drying business, had the idea to package and distribute patented medicines and household items for country stores.

Today, Perrigo operates in the healthcare sector as a manufacturer of over-the-counter consumer products. Its Consumer Self-Care Americas segment is comprised of the U.S., Mexico and Canada consumer healthcare businesses. The Consumer Self-Care International segment includes branded consumer healthcare business primarily in Europe, but also Australia and Israel. The company generates ~$4.7 billion in annual revenue.

In the 2024 first quarter, revenue decreased 8.4% to $1.08 billion. Adjusted EPS of $0.29 compared unfavorably to $0.45 in the prior year, but this was $0.06 ahead of estimates. Organic revenue declined 7% for the period. Consumer Self-Care Americas’ organic sales was lower by 14.6% due to weaker infant formula results and a product prioritization.

Future revenue growth should be low, but EPS growth will also be boosted by margin expansion. The company announced a cost savings program in Q4 2023 called “Project Energize” that is projected to create pre-tax savings of $140 million to $170 million by 2026. Through the end of the quarter, the company had realized $17 million of savings.

Perrigo reaffirmed its prior outlook for 2024 as well. The company still expects organic revenue to increase 1% to 3% and adjusted EPS to be in a range of $2.50 to $2.65 per share for the year.

Falling drug prices and the recent backlash against opioids in the U.S. has caused a significant deterioration in Perrigo’s earnings growth. In response, the company has scaled back its pharmaceutical operations. Consumer health products now represent the vast majority of total revenue. And, the company divested its pharmaceutical segment to further focus on consumer products.

The company’s consistent profitability and steady growth allows it to maintain an attractive dividend. Perrigo is one of the largest manufacturers of OTC products, which gives it a leading position in its key markets. It also should perform well in a recession as these product categories tend to hold up, even if the economy enters a downturn. Perrigo’s dividend also appears to be safe. The payout ratio is below 50%, which indicates a sustainable dividend payout.

PRGO has increased its dividend for 22 consecutive years and currently yields 3.9%.

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Unknown Dividend Stock #3

Flowers Foods FLO opened its first bakery in 1919 and has since become one of the largest producers of packaged bakery foods in the United States, operating 46 bakeries in 18 states. Well-known brands include Wonder Bread, Home Pride, Nature’s Own, Dave’s Killer Bread, Tastykake and Canyon Bakehouse.

The company operates in two segments: Direct-Store-Delivery (DSD) and Warehouse Delivery, with ~85% of the company’s product being delivered directly to stores. Fresh breads, buns, rolls, and tortillas make up about a three-fourths of the business, with sales channels for the $5.2 billion market cap company split between Supermarkets, Mass Merchandisers, Foodservice, and Convenience Store.

In the 2024 first quarter, revenue improved 2.8% to $1.58 billion, which was in-line with estimates. Adjusted EPS equaled $0.38, matching last year’s result. Branded Retail sales improved 3.5% to $1.015 billion as pricing and mix were up 2.6% while volume increased 0.3%. The Papa Pita acquisition added 0.6% to results. Materials, supplies, labor, and production costs accounted for 50.06% of sales during the quarter, which was a 160-basis point decrease from the prior year.

For the year, revenue is expected in a range of $5.091 billion to $5.172 billion. Adjusted EPS are expected to be in a range of $1.20 to $1.30. Looking longer-term, over the past decade Flowers Foods has been able to grow EPS by 3.2% per year, although this has come in fits and starts.

Flowers has been a solid producer in good times or bad, led by its iconic brands. It is in a recession-resistant industry, with nearly 99% of households buying fresh packaged bread. This has allowed FLO to steadily raise its dividend each year for many years. In 2023, Flower Foods increased its quarterly dividend 4.5% to $0.23, extending the company’s dividend growth streak to 21 consecutive years.

FLO stock currently yields 3.9%.

At the time of publication, Ciura had no positions in any stocks mentioned.