7 Undervalued Stocks with Dividends for Retirees

These income names are all trading at double-digit discounts.

Susan Dziubinski 15 February, 2022 | 4:38AM
Facebook Twitter LinkedIn

Industrial sector illustration

While they may not be the highest-yielding stocks around, dividend-growth stocks--those that have a history of increasing their payouts over time--have plenty going for them.

For starters, the management teams at these companies are focused on delivering a growing cash stream to their shareholders--and income is a key component of total return. That's a shareholder-friendly mindset.

Moreover, companies that consistently ratchet up their dividends are usually profitable and financially healthy--two especially valuable qualities during a market downturn.

Last, dividend-growth stocks provide some inflation protection, which is a plus for retirees in particular. "Income-focused investors receive a little 'raise' when a company increases its dividend," reminds Morningstar director of personal finance Christine Benz.

Given their multipurpose role, dividend-growth stocks are suitable for almost any type of investor. Furthermore, Morningstar's chief U.S. markets strategist Dave Sekera expects dividends to grow in line with earnings this year.

To uncover a few dividend-growth stocks to investigate further, we're turning to the top constituents in the Morningstar U.S. Dividend Growth Index.

The index focuses on companies with a history of dividend growth and an ability to maintain it. The index includes U.S.-based securities that pay qualified dividends and have increased their dividend payments over the past five years. To gauge the durability of dividend growth into the future, eligible constituents must display positive consensus earnings forecasts from the analyst community and must also pay out no more than 75% of their earnings in the form of dividends. Constituents are weighted in proportion to the total pool of dividends available to investors.

Given the index's construction rules, its largest constituents are relatively stable mega-cap companies. Below are the seven most heavily weighted in the index that are at least 10% undervalued as of this writing.

Exhibit 1

Get the Latest Stock Insights in Your Inbox

Subscribe Here

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Air Products & Chemicals Inc306.37 USD0.09Rating
Citigroup Inc63.67 USD2.12Rating
Comcast Corp Class A42.56 USD0.07Rating
Intel Corp23.32 USD3.55Rating
Medtronic PLC89.68 USD0.41Rating
Merck & Co Inc101.65 USD-0.22Rating
Microsoft Corp411.46 USD0.73Rating

About Author

Susan Dziubinski

Susan Dziubinski  Director of Content for Morningstar.com

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy       Disclosures        Accessibility