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2 Undervalued Stocks That Just Raised Dividends

Plus 20 stocks covered by Morningstar that increased their dividends in May.

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Securities In This Article
Northrop Grumman Corp
Cogent Communications Holdings Inc

Dividend stocks have lagged the broader market over the last year, but that poor performance provides opportunities for long-term investors to find undervalued dividend payers. That includes stocks that have been raising their payouts.

Dividend investing comes in various forms. Investors can look for stocks with the highest yields, names with a history of stable dividend payouts and strong finances, or companies raising dividends. For this article, we screened for stocks among US stocks covered by Morningstar that have increased quarterly dividends, which can signal a company’s confidence in its future finances.

Two undervalued companies increased their dividends in May:

  • Northrop Grumman NOC
  • Cogent Communications Holdings CCOI
Morningstar Rating
New Annual Dividend
Dividend Change %
New Dividend Yield
Northrop GrummanNOC4 Stars$8.2410.161.84
Cogent Communications HoldingsCCOI4 Stars$3.901.046.87

For a full list of companies covered by Morningstar that increased their dividends during the month, see the bottom of this article.

Undervalued Value Stocks That Raised Dividends

How We Screened for Undervalued Stocks That Raised Dividends

We combined this screen with one for stocks trading below their Morningstar fair value estimates, meaning they have attractive prices for long-term investors. These stocks could benefit from increased dividend yields and the possibility that their investment values will grow.

We started with the full list of US-based companies covered by Morningstar analysts and looked for names that pay investors a quarterly dividend. We then tracked changes from previous payouts in dividends declared during February. From there, we filtered for companies that saw dividend increases. After that, we picked companies considered undervalued by Morningstar analysts, meaning they are rated 4 or 5 stars.

Here’s a deeper dive into these stocks and their outlooks from Morningstar’s equity analysts.

Northrop Grumman

“We anticipate the company will continue to generate substantial and growing operating and free cash flows. This growth is offset in the short term by capital expenditure that is slightly higher than our 3% of sales midcycle level as the company invests in capacity to service several key programs. Between its cash flow profile, available credit, and the relatively long maturities of its existing debt, we aren’t concerned about Northrop’s liquidity,”

Nicolas Owens

Cogent Communications

“Cogent has recently returned more than 100% of its free cash flow (operating cash flow minus capital expenditures) to shareholders via its regular dividend. A payout ratio above 100% is not maintainable long term, but we don’t think the dividend is in danger unless business severely deteriorates.”

Matthew Dolgin

Morningstar Rating
New Annual Dividend
Dividend Change %
New Dividend Yield
NVIDIANVDA3 Stars$0.40150.000.03
NOVNOV3 Stars$0.3050.001.74
ESABESAB3 Stars$0.3233.330.34
Marriott InternationalMAR3 Stars$2.5221.151.09
Penske Automotive GroupPAG3 Stars$3.8410.342.54
PaychexPAYX3 Stars$3.9210.113.22
Ralph LaurenRL2 Stars$3.3010.001.82
American Water Works CoAWK3 Stars$
Donaldson CoDCI2 Stars$
IDEXIEX3 Stars$2.767.811.34
KKR & CoKKR3 Stars$0.706.060.69
Expeditors International of WashingtonEXPD2 Stars$2.925.802.39
Lowe’s CompaniesLOW3 Stars$4.604.552.12
Lennox InternationalLII1 Star$4.604.550.94
AppleAAPL2 Stars$
M&T BankMTB3 Stars$5.403.853.69
Simon Property GroupSPG3 Stars$8.002.565.25
VistraVST1 Star$0.871.160.97
Cardinal HealthCAH3 Stars$
Microchip TechnologyMCHP3 Stars$1.810.441.92

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Tom Lauricella

Editorial Director, Markets
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Tom Lauricella is chief markets editor for Morningstar.

Lauricella joined Morningstar in 2015 after a long career at The Wall Street Journal and Dow Jones. During his time as a reporter and editor, he covered a wide array of investing topics, including mutual funds, retirement planning, and global financial markets. While at the Journal, he won the prestigious Gerald Loeb award for his role in covering the May 2010 stock market “Flash Crash.”

Lauricella holds a bachelor’s degree from New York University, where he majored in journalism.

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