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Commentary

3 High-Quality Undervalued Dividend Payers

The market's breather is creating some opportunities in dividend-paying stocks.

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Stocks have finally taken a bit of a breather during the last few weeks after an impressive runup in the first part of the year. The broad-based Morningstar US Market Index fell 1.1% during the last week and is up only 1.0% during the last month. The market seems to be having jitters over stretched valuations in some sectors and the possibility that the Fed is going to taper its quantitative easing program sooner than expected. The mild sell-off hasn't created a ton of new opportunities, but some high-quality dividend payers are starting to look attractive.

Across sectors, the pullback in stocks has been far from even. As interest rates began to rise a bit, the selling pressure was more focused on some of the higher-yielding parts of the market. During the last month, real estate (-6%), utilities (-5%), and consumer defensive (-1.3%) stocks have been among the hardest-hit while other areas such as financial-services (+4%) have actually performed quite well. 

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Jeremy Glaser does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.