3 Top Dividend Aristocrats to Buy Now

By Tyler Crowe Markets Fool.com

It's not often that Dividend Aristocrat stocks are cheap. Their reputation as stable investments that steadily raise payouts year in and year out makes them stocks for which investors willingly pay a decent premium. On occasion, the market does view these companies with a slightly skeptical view, which makes for a great time for investors to jump in. Three Dividend Aristocrat stocks that look compelling today are rig company Helmerich & Payne (NYSE: HP), integrated oil and gas giant ExxonMobil (NYSE: XOM), and telecommunications giant AT&T (NYSE: T). Here's a quick look at why they are currently on the cheap side and why it makes for an opportune time to buy shares.

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The second wave of American shale drilling is on its way

It almost seems bizarre to see Helmerich & Payne on the list of Dividend Aristocrat stocks. It works in a business where pricing power over its customers is hard to come by and is notoriously cyclical. Yet for more than 40 years, the owner and lessor of drilling rigs for the oil and gas industry has been able to raise its dividend.

While the company has proven to be a good steward of investor capital over the long term, today is looking to be one of the better times to invest in the company. The North American oil and gas boom from a few years ago popped pretty hard, and as a result, drilling activity ground to a near halt. As recently as this past spring, total active rigs in the field was at its lowest rate since statistics were first gathered back in the 1940s and some speculate it was the lowest we have seen since the 1860s.

Recently, though, it has started to tick back up again. This bodes well for Helmerich & Payne because it has some of the most advanced drilling rigs on the market that have shown to help produce higher returns for producers. Even more importantly, it has a lot of this type of rig available to go to work. Its fleet of available high-specification rigs is larger than the rest of its land rig competitors combined. As oil prices tick back up slowly and producers learn how to cut costs and generate higher returns on each barrel of oil, Helmerich's fleet will be in demand and it will lead to a surge in top- and bottom-line growth. With today's stock trading at 1.6 times tangible book and a dividend yield of 4.1%, now looks like a good time to get into shares of Helmerich & Payne.

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Strong earnings history and plenty of potential ahead

Yes, ExxonMobil is another oil and gas company, but the last two years have been so brutal on the industry in general. For long-term investors in dividend stocks, the best time to buy cyclical businesses like ExxonMobil is at or near the bottom of the industry cycle. After several quarters of less-than-spectacular results and even some bearish analysts fearing that the company might cut its dividend, it's pretty easy to see why a lot of people have been pessimistic about the stock.

Yet, as we start to see glimmers of an oil and gas recovery, this may be one of the better times to buy shares of ExxonMobil. Let's keep in mind that this company has remained solidly in the top spot in the oil and gas industry for generating the best returns on capital for years. Also, the company continues to be one of the better positioned for the long term as it has the assets in just about every type of production from North American shale to deep offshore to LNG and everything in between. This kind of investment option gives it a big leg up over some of its integrated oil and gas peers as most of them are making big bets on one or two of these kinds of production sources.

Today, shares of ExxonMobil don't look cheap when valued using earnings-based multiples because, well, earnings have been tough as of late, but that is the thing with investing in cyclical stocks: Sometimes they look expensive because earnings are in a low point of the cycle. A better way to look at this company is price to tangible book value, which looks at the underlying assets' ability to generate earnings in the future. In this case, ExxonMobil's shares trade at 2.1 times tangible book value, which is well below the company's 10-year historical valuation. So, as we wait for the energy market to rebound in earnest, today may be the time to buy ExxonMobil.

Unease over recent acquisition makes this telecom giant compelling

For the past several months, shares of AT&T haven't exactly lit the world on fire. The October announcement that it was planning to buy Time Warner(NYSE: TWX) for just north of $84 billion has made some investors a little more bearish about the company as some fear the combination of telecommunications provider and media company won't generate the kind of competitive advantages that management seems to think it will. Because of this less-than-optimistic outlook, AT&T stock currently trades at a rather modest enterprise value-to-EBITDA ratio of 6.6 times.

If the thesis for AT&T buying Time Warner goes according to plan, it could give the company a compelling offering that few other companies will be able to replicate. Time Warner's ownership of prized assets like HBO and Warner Brothers Studios gives it a mountain of unique content that it can bundle with its various services. With tech companies nipping at the heels of the major telecoms providers with either unique content or internet service, the combination of these two should help to keep these newer offerings at bay.

Even if the merger doesn't happen exactly as hoped, it is still in relatively decent shape financially so this deal won't break the company. AT&T expects its net debt-to-adjusted EBITDA ratio will be in the 2.5 times range within a year of the transaction, which suggests that the company isn't breaking the bank with this deal. Also, it shouldn't compromise AT&T dividend, which yields 5.1% today. This all seems to suggest that the market is already pricing in a less-than-stellar marriage between the two companies. If AT&T is able to show even a modest return on this acquisition, then a buy today will look pretty smart.

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Tyler Crowe owns shares of ExxonMobil.You can follow him at Fool.comor on Twitter@TylerCroweFool.

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