Insider buying is a viable means of finding stocks trading at a value. Insiders rarely have reason to buy once they’ve established skin in the game, so new purchases are telling. Today, we’re looking at three dividend stocks the insiders are buying, and they all provide value in one form or another. In all cases, the yields are safe for 2024 and have an outlook for distribution growth. 

The Aaron’s Company is a high-yield value

The Aaron’s Company (NYSE: AAN) is a cheap stock trading at 10.5X earnings but isn’t a value compared to peers. Industry-leading Ethan Allen trades near 10.5X earnings, and the entire sector is cheaper than the S&P 500. In this case, it is the dividend that counts. Aaron’s pays a solid 4.4% dividend yield with an outlook for distribution growth. 

The company’s official history lists only three consecutive increases, which does not count the pre-spin time frame. Aaron’s Company was a part of Aaron’s Holding Company, which has a robust history of dividend payments and annual increases. As things stand, Aaron’s Company is paying about 45% of its 2024 earnings consensus and 40% of 2024, so another year of increase is expected. 

Shares of the stock have been under pressure since the split from Aaron’s Holding Company and recently hit a historic low in late 2023. The market is rebounding from that low, aided by insider activity. Four insiders purchased shares in Q4 2023, including the CEO, an EVP and a director. Insiders own about 4.5% of the company; institutions own most of the rest. Analysts rate Aaron’s at Hold and see it advancing 15% from recent levels. 

WK Kellogg Co. on track for distribution growth 

Insiders at WK Kellogg Co. (NYSE: KLG) bought in November, a little over a month after the stock was spun off from the Kellogg Co. Four insiders, including the CEO and CFO, purchased shares, bringing the inside ownership to less than 1%. Institutions are more committed and own about 45% of the stock. 

Regarding the dividend, KLG's stock history gives a partial picture. It’s paid a single quarterly distribution since the spin-off; its parent company has decades of history to establish a growth outlook. Even without distribution growth, the 4.4% yield is attractive within the high-yielding consumer staples sector. 

WK Kellogg’s first payment of $0.16 annualizes to 45% of the 2024 earnings outlook, sufficiently low to support a distribution growth outlook. At this level, the company could make annual increases for several years with no earnings growth and do little damage to the cash flow. Because earnings growth is expected beyond 2024, small annual distribution increases may be expected for the next several years. However, ten analysts rate KLG at Reduce and see it trading above their consensus price target. 

Kemper is a deep value with a solid yield

Kemper (NYSE: KMPR) is an insurance holding company with four insiders making recent purchases. Three directors and the CEO purchased shares in late November and December, bringing total insider holdings to 6.2%, and institutional activity is equally solid. The institutional activity shows some rotation within the group in 2023 but steady buying all year. They own 79% of the stock and may buy more in 2024. 

Kemper is expected to return to earnings growth in 2024. The 2024 outlook has its payout ratio below 30%, putting it back in a safe position. Kemper is not a consistent distribution grower but may increase if the year is as good as expected. 

KMPR insider buying coincides with the stock hitting a long-term low. The price action has since rebounded, and a potential catalyst exists for higher prices. The company is expected to report earnings in early February, and the bar is set low. Analysts expect the company to return to profitability but for revenue to fall YOY and sequentially. Kemper stock is rated at Buy and viewed as a deep value, trading below the analyst's lowest price target.