Why Dividend Kings Are Undervalued in a Tech-Dominated Market

In an era where tech stocks dominate headlines and investor portfolios, a quiet revolution is brewing in the world of dividend-paying stalwarts. Known as “Dividend Kings”—companies with at least 50 consecutive years of dividend growth—stocks like Altria (MO), Stanley Black & Decker (SWK), and Fortis (FTS) are being overlooked by growth-focused investors. Yet their low valuation multiples, steady dividend growth, and defensive sectors position them as compelling contrarian opportunities in today's volatile market.

The Case for Sector Diversification

The tech sector's dominance has skewed investor behavior toward high-growth, high-beta stocks, often at the expense of stability. Meanwhile, Dividend Kings operate in sectors like utilities, consumer staples, and industrials—industries that thrive during economic shifts and provide consistent cash flows. These sectors are recession-resistant, making them ideal for long-term portfolios.

Three Dividend Kings Leading the Charge

1. Altria Group (MO): Tobacco's Lasting Power
- Dividend Yield: 6.8% (highest among the three)
- Dividend Growth Streak: 54 years
- Valuation: P/E of 10.38 (as of late 2024) and a negative P/B ratio due to debt-heavy balance sheet.
- Why It's Undervalued: Despite its “Borderline Safe” dividend rating, Altria's stock trades at a discount to its historical norms. Its shift toward smoke-free products (e.g., vaping and nicotine pouches) offers growth potential, yet investors remain wary of regulatory risks. This skepticism creates an entry point for those willing to accept the company's structural challenges for its high yield.

2. Stanley Black & Decker (SWK): Industrial Resilience
- Dividend Yield: 5.5%
- Dividend Growth Streak: 56 years (longest among industrial companies on the NYSE)
- Valuation: P/E of 27.42 (Q2 2025) amid tariff-driven earnings headwinds.
- Why It's Undervalued: While SWK's P/E appears elevated, it reflects near-term pain from tariffs rather than long-term fundamentals. The company's restructuring efforts—shifting supply chains to avoid tariffs—position it for a rebound. Its dividend remains “Safe,” with a payout ratio well below 70%, even after recent cuts to earnings guidance.

3. Fortis (FTS): Utilities as a Stable Anchor
- Dividend Yield: 3.6%
- Dividend Growth Streak: 51 years
- Valuation: P/E of 19.0 and P/B of 1.38 (June 2025), both below historical averages.
- Why It's Undervalued: Utilities are inherently defensive, yet FTS trades at a discount to peers like BCE Inc. (P/E 49.02). This Canadian utility's regulated rate base and exposure to North American markets provide steady cash flows, making its valuation a contrarian buy at current levels.

A Contrarian Play in a Tech-Driven World

While tech stocks capture attention with their growth trajectories, they also command premium valuations. For example, FAANG stocks trade at P/E ratios exceeding 25, with many offering negligible dividends. In contrast, Dividend Kings like MO, SWK, and FTS combine low valuations with high dividend yields and proven stability.

Risks and Rewards

No investment is without risk. Altria faces regulatory and societal pressures on tobacco use, while SWK's tariff issues remain unresolved. However, their dividend safety scores—“Safe” for SWK and FTS, and “Borderline Safe” for MO—suggest these companies prioritize payouts even amid headwinds.

The Bottom Line: A Shift Toward Value

As investor sentiment inevitably rotates from growth to value, Dividend Kings could lead a comeback. Their low valuations, steady cash flows, and defensive sectors make them ideal for portfolios seeking stability. For income-focused investors, the trio of MO, SWK, and FTS offers a compelling mix of yield, growth, and diversification—a rare trifecta in today's market.

Investment Takeaway: Consider a gradual allocation to these Dividend Kings, using dips in their stock prices to build positions. Their undemanding valuations and long-term track records suggest they're poised to outperform as markets rebalance toward stability.

Data as of June 2025. Past performance does not guarantee future results.