Dividend stocks have been left in the dust by a growth-stock-powered rally over the last year, but that poor performance is providing opportunities for long-term investors to find undervalued dividend payers. That includes those that have been raising their payouts.
Dividend investing comes in various forms. Investors can look for stocks that offer the highest yield, names with a history of stable payouts and strong finances, or companies that are raising dividends.
Undervalued Dividend Stocks With Higher Payouts
For this article, we screened for stocks that have increased their quarterly dividends, which can be a sign of a company’s confidence in its future finances. We combined this screen with one for stocks that are trading below their Morningstar fair value estimates, meaning they have attractive prices for long-term investors. These stocks offer the potential to benefit from both increased dividend yields and the possibility that investment values will grow.
We started with the full list of U.S.-based companies covered by Morningstar analysts and looked for names that pay investors a quarterly dividend. We then tracked changes between any dividends declared during January. From there we filtered for companies that saw a dividend increase of 5% or more to capture the most substantial changes. Stocks with dividend yields under 2% were then excluded. After that, we picked companies considered undervalued by Morningstar analysts, meaning they are rated 4 or 5 stars.
In all, there were six undervalued companies with dividend increases of more than 2% that made it through. A table with these stocks’ key Morningstar metrics is at the bottom of this article.
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