Companies that pay dividends and also regularly increase them often represent attractive investments.
“Companies with growing dividends tend to be profitable and financially healthy — two valuable qualities during periods of economic slowdown,” wrote Morningstar investment specialist Susan Dziubinski. “That’s a scenario many market observers expect in 2024.”
In addition, “such companies are more likely to have competitive advantages that may allow them to pass along price increases and thereby maintain profit margins during inflationary times,” she said.
Also, “dividend-growth stocks tend to be less volatile than the overall stock market and are therefore attractive investments for playing a little defense.”
Dziubinski put together a list of 10 cheap dividend-growth stocks to buy. They are companies that
- have lifted their dividend payments over the past five years,
- pay out no more than 75% of their earnings in the form of dividends,
- possess durable competitive advantages, as measured by Morningstar’s moat ratings,
- and were trading among the widest discounts to Morningstar’s fair value estimates as of Nov. 24.
Morningstar Top 10 dividend-growth stocks now
Albemarle (ALB) -), the world’s largest lithium producer
Morningstar moat rating: narrow. Morningstar fair value estimate: $300. Friday price quote: $124.55. Forward dividend yield: 1.32%.
Baxter International (BAX) -), the medical-supplies provider
Morningstar moat rating: narrow. Morningstar fair value estimate $67. Friday price quote: $36.60. Forward dividend yield: 3.22%.
Lithia Motors (LAD) -), a used-car retailer
Morningstar moat rating: narrow. Morningstar fair value estimate $500. Friday price quote: $274.40. Forward dividend yield: 0.75%.
Polaris (PII) -), the recreational-vehicle maker
Morningstar moat rating: wide. Morningstar fair value estimate: $160. Friday price quote: $85.95. Forward dividend yield: 3.15%.
Discover Financial Services (DFS) -), the credit-card company
Morningstar moat rating: narrow. Morningstar fair value estimate: $152. Friday price quote: $94.85. Forward dividend yield: 2.90%.
ResMed (RMD) -), one of the world’s biggest respiratory-care-device companies
Morningstar moat rating: narrow. Morningstar fair value estimate: $258. Friday price quote: $158.90. Forward dividend yield: 1.22%.
Comerica (CMA) -), the regional bank
Morningstar moat rating: narrow. Morningstar fair value estimate: $73. Friday price quote: $48. Forward dividend yield: 6.28%.
Estee Lauder (EL) -), the cosmetics company
Morningstar moat rating: wide. Morningstar fair value estimate: $200. Friday price quote: $131.80. Forward dividend yield: 2.07%.
Pfizer (PFE) -), the drug giant
Morningstar moat rating: wide. Morningstar fair value estimate: $48. Friday price quote: $29.05.
Forward dividend yield: 5.38%.
Eastman Chemical (EMN) -), the chemical maker
Morningstar moat rating: narrow. Morningstar fair value estimate: $125. Friday price quote $85.20. Forward dividend yield: 3.77%.
