3 Dividend Stocks for September 2023

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 from Morningstar’s Dividend Yield Focus Index that look undervalued today. The Morningstar Dividend Yield Focus Index tracks the top 75 high-yielding stocks that meet our screening requirements for quality and financial health.

3 Dividend Stocks for September 2023

1. Pfizer PFE
2. Medtronic MDT
3. Gilead Sciences GILD

Our first undervalued dividend stock is Pfizer. We don’t think the market fully appreciates Pfizer’s ability to offset major patent losses over the next five years. Second-quarter results were mixed, due to lower COVID-19 vaccine and treatment sales; but Pfizer has contingency plans in place to cut costs if COVID-related sales don’t improve in the third quarter. We think Pfizer’s dividend is where it should be, as the company targets close to a 50% payout in dividends as a percentage of normalized earnings, which is on track for a mature industry. We think Pfizer stock is worth $48 per share.

Our second undervalued dividend stock is Medtronic. Medtronic is the largest pure-play medical-device maker. It’s a key partner for its hospital customers, thanks to its diversified product portfolio aimed at a wide range of chronic diseases. We think Medtronic’s plans to spin off its patient monitoring and respiratory innovations businesses will only help the company pivot toward faster-growing markets. Medtronic has raised its dividend for 46 consecutive years. We think shares are worth $112.

Our final undervalued dividend stock is Gilead Sciences. The drugmaker generates outstanding profit margins with its HIV and HCV portfolio, and its portfolio and pipeline support a wide economic moat rating from Morningstar. Second-quarter results came in strong. The company has steadily increased its dividend over time; its payout ratio hovers around 50%, which we think is reasonable. We think shares are worth $97.

I’m Susan Dziubinski with Morningstar. Thanks for watching, and we’ll see you next month.

Watch “3 Dividend Stocks for August 2023″ for more from this series.

Morningstar director Damien Conover, sector strategist Karen Andersen, and senior analyst Debbie Wang provided the research behind this segment.

Morningstar, Inc. licenses indexes to financial institutions as the tracking indexes for investable products, such as exchange-traded funds, sponsored by the financial institution. The license fee for such use is paid by the sponsoring financial institution based mainly on the total assets of the investable product. Please click here for a list of investable products that track or have tracked a Morningstar index. Morningstar, Inc. does not market, sell, or make any representations regarding the advisability of investing in any investable product that tracks a Morningstar index.