2 Dividend Stocks to Double Up on Right Now

With factors as wide-ranging as inflation, the rise of artificial intelligence (AI), and now geopolitics adding uncertainty to the market, it's not surprising many dividend stocks remain under pressure. This includes blue chip dividend stocks, or shares in blue chip companies with long track records of dividend growth.

Some have attempted to recover, but the emergence of new reasons to be fearful has affected their near-term recovery prospects. In other situations, the macro backdrop has worsened sentiment toward stocks, primarily driven by company-specific factors.

However, while a frustrating situation for investors already in these stocks, the current environment has created the opportunity to double down on these stocks or, in the case of new investors, "buy the dip." In my view, that's the situation with Automatic Data Processing (NASDAQ: ADP) as well as with Kimberly-Clark (NASDAQ: KMB).

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Grab Automatic Data Processing while it's still out of favor

Over the past year, various concerns have weighed on shares in Automatic Data Processing, better known as ADP. These issues have included concerns about slowing growth, rising unemployment, competition, and, most recently, AI disruption. After the stock's most recent big drop on the heels of the company's latest earnings release, shares have tried but struggled to bounce back.

Now trading for around $213 per share, ADP is an attractive "buy the dip" dividend play for two reasons. First, this Dividend King, with over 50 years of consecutive annual dividend growth under its belt, sports a moderately high forward dividend yield of 3.2%. Moreover, ADP has increased its dividend at a relatively rapid pace over the past few years. ADP's last dividend increase, implemented last fall, was 10.1%.

Second, alongside strong dividend growth potential, ADP offers ample gain potential as well. The aforementioned crop of concerns has pushed shares down to a valuation of just 18 times forward earnings. For comparison, this stock has, for most of the recent past, sported a mid-20s forward multiple. As macro and company-specific concerns fade and earnings releases remain strong, shares could eventually return to such a valuation.

Kimberly-Clark is another Dividend King due for a sentiment shift

Shareholders have already approved Kimberly-Clark's merger with Kenvue, but many in the market remain skeptical of the deal's prospects. Previously, there have been concerns about potential risks in Kenvue's portfolio of brands, including Tylenol. Others are skeptical whether this combination of a personal care products company with a consumer health products company will live up to the high expectations set by management.

All this means many doubt whether the cost and growth synergies touted in the merger press release will play out as expected. However, with cost synergy projections set so high at $2.1 billion, even partially achieving this could bode well for earnings moving forward. Continued earnings growth will enable Kimberly Clark to maintain Dividend King status.

There could also be the opportunity to identify and sell off underperforming brands. This could free up capital for share repurchases, all while opening the door for Kimberly-Clark to improve its overall growth rate.

Currently, Kimberly-Clark has a forward dividend yield of 3.5%. Dividend growth has averaged 3.5% over the past five years.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kenvue. The Motley Fool has a disclosure policy.