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3 Undervalued Dividend Payers With Wide Moats

These consumer products stocks are good picks for investors due to a recent erosion in shares.

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Erin Lash: Attractive dividends abound in the consumer products realm, and given the recent erosion in shares, we think investors would be well-served to feast on these three undervalued, wide-moat names: Procter & Gamble, General Mills, and Coca-Cola.

P&G has pampered investors with a stream of dividends for the past 130 years, and with the yield hovering around 4% and our outlook that returning excess cash to shareholders will remain a priority, we think investors should add this wide-moat name to their shopping cart. While shares trade at a more than 20% discount to our $98 fair value estimate, we don't believe the recent pullback has reflected an erosion in the firm's competitive edge, but rather is due to the languishing top-line performance which has plagued operators across the industry. Moreover, we believe the firm's efforts to right-size its brand mix over the past several years will position it to focus its brand investments on the highest return opportunities and ensure that its mix better aligns with evolving consumer trends, bolstering its sales momentum and supporting the entrenched retail relationships that underlie its wide moat.

Erin Lash does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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