Top Undervalued Dividend Growth Stocks and Funds to Buy Now (September 2025)
As of late September 2025, dividend growth stocks and funds remain attractive amid market volatility, offering reliable income with potential for capital appreciation. These selections focus on companies and ETFs with histories of consistent dividend increases (e.g., Dividend Aristocrats with 25+ years), strong fundamentals, and current discounts to fair value estimates (15%+ undervaluation based on analyst models like Morningstar's). Yields are approximate and fluctuate; data draws from recent analyst consensus. Prioritize diversification across sectors and consult a financial advisor.Top Undervalued Dividend Growth StocksThese 8 picks emphasize Dividend Aristocrats/Kings where possible, with sustainable payout ratios (<70%), projected 5%+ annual dividend growth, and resilience in staples, healthcare, and telecom. They're trading below historical P/E averages or fair values due to temporary headwinds like tariffs or sector softness.
Top Undervalued Dividend Growth Funds (ETFs)For easier diversification, these ETFs track dividend growers (10+ years of increases) and trade at discounts to NAV or peers. They offer low fees (under 0.35%), monthly/quarterly payouts, and exposure to 200+ holdings. Focus on those with quality/momentum tilts for sustainability.
Key Insights:
Stock Ticker | Company Name | Sector | Current Yield | Years of Dividend Growth | Why Undervalued & Growing Now? |
|---|---|---|---|---|---|
MRK | Merck & Co. | Healthcare | 3.2% | 13 | 24% below $111 fair value on HPV vaccine softness in China; ~50% payout supports 5-7% annual hikes; Keytruda pipeline drives 8% EPS growth. |
PEP | PepsiCo | Consumer Staples | 3.5% | 52 (Aristocrat) | 11% discount to $162 fair value, P/E 25.8x (vs. 28x historical); mid-single-digit growth via resilient brands; 66% payout ratio. |
VZ | Verizon Communications | Telecom | 6.5% | 19 | 20% undervalued at 8.5x forward P/E; stable wireless cash flows; 2-3% growth from Frontier synergies, 50% coverage. |
UPS | United Parcel Service | Industrials | 6.5% | 15 | 15% below fair value post-wage pressures; e-commerce rebound projects 5%+ revenue growth; payout to 60% by 2026. |
KMB | Kimberly-Clark | Consumer Staples | 3.8% | 53 (Aristocrat) | 20% undervalued on volume dips; fiscal 2025 gains from Huggies investments; 5%+ history, <60% payout. |
CLX | Clorox | Consumer Staples | 3.9% | 47 (Aristocrat) | 26% below $177 fair value amid sales stabilization; mid-single-digit growth, ~60% payout; tariff mitigation via efficiencies. |
O | Realty Income | Real Estate (REIT) | 5.3% | 30 (Aristocrat) | Discount to NAV; 4.2% CAGR since 1994, 663 monthly payouts; 3-5% growth from diversified retail amid rate cuts. |
SYY | Sysco | Consumer Staples | 2.8% | 55 (Aristocrat) | 17% market share in $370B industry; 3-5% sales growth FY2026; recent $0.03 hike, strong balance sheet. |
ETF Ticker | Fund Name | Expense Ratio | Current Yield | Why Undervalued & Growing Now? |
|---|---|---|---|---|
SCHD | Schwab U.S. Dividend Equity ETF | 0.06% | 3.6% | Tracks Dow Jones U.S. Dividend 100 Index; 90% in stable sectors; outperformed peers YTD, 10%+ 5-yr ann. return; undervalued vs. broad market. |
VIG | Vanguard Dividend Appreciation ETF | 0.06% | 1.8% | Targets 10+ yrs growth; top holdings like MSFT, AVGO; long-term focus beats high-yield peers; 12% discount to growth ETFs. |
DGRO | iShares Core Dividend Growth ETF | 0.08% | 2.3% | 5+ yrs increases, quality screen; loaded with aristocrats; monthly income option, downside protection; 8% below fair value. |
NOBL | ProShares S&P 500 Dividend Aristocrats ETF | 0.35% | 2.0% | Exclusive 25+ yr aristocrats (69 holdings); beat SPY in Aug 2025; undervalued with 5.19% avg. growth rate. |
FDVV | Fidelity High Dividend ETF | 0.15% | 3.1% | Large/mid-cap focus, payout/growth screens; monthly dividends; strong in financials/energy; 15% discount post-volatility. |
- Why These? Stocks average 3-6% yields with 4-7% projected growth; funds provide instant diversification (e.g., SCHD's 100 holdings). All show undervaluation via P/E, DCF models, or NAV discounts, per Morningstar/Seeking Alpha.
- Growth Outlook: Aristocrats' 5.55% avg. hike in 2025 supports compounding; staples/healthcare resist recessions.
- Risks: Interest rate shifts could hit REITs/telecom; monitor Q3 earnings for coverage.
- Strategy Tip: Allocate 20-30% to funds for core exposure, add 2-3 stocks for tilt. Reinvest dividends for 8-10% total returns over 5 years.
