Susan Dziubinski: Hi. I’m Susan Dziubinski with Morningstar, filling in for Morningstar DividendInvestor editor David Harrell. In this monthly dividend series, we take a look at stocks that are popular with dividend investors.
Today, we’re focusing on three stocks that are considered Dividend Aristocrats. What is a Dividend Aristocrat? A Dividend Aristocrat is a company that has raised its dividend for at least 25 consecutive years.
Of course, with a focus on dividend growth, these companies should be on any dividend stock investors’ watchlist. But Dividend Aristocrats aren’t all high-dividend stocks—and nor are they automatically stocks to buy. At Morningstar, we suggest investors buy Dividend Aristocrats only when their stocks are trading below what they’re worth.
3 Dividend Stocks for October 2023
Our first Dividend Aristocrat is Albemarle ALB. Albemarle is one of the world’s largest producers of lithium. Morningstar assigns the company a narrow economic moat rating, which suggests that the company’s competitive advantages should persist for at least another decade. Morningstar expects demand for lithium to triple by 2030. Albemarle currently pays a quarterly dividend of $0.40 per share, which translates to a trailing yield below 1%. We think the company’s current policy to increase dividends seems appropriate, as we forecast dividends to average around 30% of net income over the next five years. We think Albemarle stock is worth $350 and shares look significantly undervalued.
Our second Dividend Aristocrat is Medtronic MDT. Medtronic is the largest pure-play medical-device maker. Medtronic maintains a diverse portfolio of products used to treat a wide range of chronic diseases for acute care in hospitals. Morningstar assigns the company a wide economic moat, which means we think the company’s competitive advantages will last 20 years or more. Indeed, the company stands to benefit from the ongoing embrace of medical technology and the aging population of the United States. The company pays a quarterly dividend of $0.69 per share, and the stock yields more than 3% today. We think Medtronic stock is undervalued and worth $112.
Read More: A Dividend Aristocrat That’s 20% Undervalued
Our final Dividend Aristocrat is Enterprise Products Partners EPD. Enterprise is a limited partnership that transports and processes natural gas, natural gas liquids, crude oil, refined products, and petrochemicals. It is one of the largest midstream companies, and Morningstar assigns Enterprise a wide economic moat rating. The partnership pays a quarterly dividend of $0.50 per unit, and the units offer a yield above 7%. However, Morningstar thinks units are fairly valued today, worth $27.50 each. This Dividend Aristocrat is best left on a watchlist, for now.
I’m Susan Dziubinski with Morningstar. Thanks for watching. We’ll see you next month.
Morningstar strategists Stephen Ellis and Seth Goldstein and senior analyst Debbie Wang provided the research behind this segment.
Watch “3 Dividend Stocks for September 2023″ for more from this series.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.