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6 Undervalued Stocks That Just Raised Dividends

Yum Brands and Comcast are among the stocks with higher payouts.

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Dividend stocks have been left in the dust by a growth-stock-powered rally over the last year, but that poor performance is providing opportunities for long-term investors to find undervalued dividend payers. That includes those that have been raising their payouts.

Dividend investing comes in various forms. Investors can look for stocks that offer the highest yield, names with a history of stable payouts and strong finances, or companies that are raising dividends.

Undervalued Dividend Stocks With Higher Payouts

For this article, we screened for stocks that have increased their quarterly dividends, which can be a sign of a company’s confidence in its future finances. We combined this screen with one for stocks that are trading below their Morningstar fair value estimates, meaning they have attractive prices for long-term investors. These stocks offer the potential to benefit from both increased dividend yields and the possibility that investment values will grow.

We started with the full list of U.S.-based companies covered by Morningstar analysts and looked for names that pay investors a quarterly dividend. We then tracked changes between any dividends declared during January. From there we filtered for companies that saw a dividend increase of 5% or more to capture the most substantial changes. Stocks with dividend yields under 2% were then excluded. After that, we picked companies considered undervalued by Morningstar analysts, meaning they are rated 4 or 5 stars.

In all, there were six undervalued companies with dividend increases of more than 2% that made it through. A table with these stocks’ key Morningstar metrics is at the bottom of this article.

  • Yum Brands YUM
  • Comcast CMCSA
  • Alliant Energy LNT
  • NiSource NI
  • Eversource Energy ES
  • Kimberly-Clark KMB

Dividend Stock Performance

Data as of Source: Morningstar Direct, Morningstar Indexes.

Undervalued Stocks That Just Raised Dividends

Here are the undervalued six stocks with the largest dividend increases of the group and our analyst’s take on those dividend-paying stocks.

Yum Brands

“Yum’s competitive strategy has evolved in recent years, with the firm restructuring its corporate operations along brand rather than geographic lines after the spinoff of its China unit in 2016. Today, Yum’s priorities include strategic menu development, ease of access, and distinctive brand identities. These pillars reinforce the strength of Yum’s family of brands, driving our forecast for low-single-digit comparable sales growth across the portfolio. While the competitive picture remains dynamic, the firm’s continued investments in international expansion appear well-placed and underpin management’s high-single-digit systemwide sales growth forecast, with our 7% estimate through 2027 falling toward the lower end of that guidance as competition for international growth intensifies.”

Read more of Sean Dunlop’s take on Yum Brands here.

Comcast

“Comcast’s core cable business enjoys significant competitive advantages but has seen growth slow as fixed-wireless offerings have provided a viable option for a subset of customers. NBCUniversal isn’t as well-positioned but holds unique assets, including core content franchises and theme parks. We don’t love the firm’s strategy around Peacock, but we expect NBCU’s assets will play a significant role in the media landscape of the future. Overall, we expect Comcast will deliver only modest growth, but with strong cash flow for the foreseeable future.”

Find the full report from Michael Hodel on Comcast here.

Alliant Energy

“We expect Alliant Energy to invest over $10 billion in 2023-27, supporting our expectation that the company will achieve the top half of management’s 5%-7% growth target. Management estimates continued capital investment opportunities in the second half of the decade, supporting growth beyond our forecast.”

Andrew Bischof’s outlook for Alliant Energy can be read here.

NiSource

“NiSource’s focus on electric and gas infrastructure, including renewable energy, creates growth opportunities that could last for a decade or longer. We expect about half of NiSource’s operating income will come from its Indiana gas and electric utility, NIPSCO, and the rest from its six natural gas distribution utilities, excluding minority interest. We expect the gas utilities to grow along with the electric business in the near term, keeping that earnings mix about the same for at least the next four years.

“Driving that growth is $16 billion of investment that NiSource plans during the next five years for electric and gas system infrastructure projects. Key initiatives include replacing steel and cast iron pipe with plastic at its natural gas distribution utilities and replacing coal plants with renewable energy at its electric business.”

The rest of Travis Miller’s NISource report is available here.

Eversource Energy

“We are reaffirming our $72 fair value estimate for Eversource Energy after the company announced it will raise its dividend 6% to $2.86 per share annualized for 2024. This is in line with our outlook and the company’s average dividend growth since 2017. We think the dividend increase shows that Eversource’s core utilities are operating well despite the company’s struggles to exit its offshore wind investments.”

Click here for the rest of Travis Miller’s Eversource Energy report.

Kimberly-Clark

“Kimberly-Clark generates significant levels of excess cash, with free cash flow to sales averaging more than 10% over the past 10 years. And we forecast free cash flow will average around 13% of sales annually through fiscal 2032. Although we think bolstering cash returned to shareholders will remain its top aim (with our forecast calling for it to pay out around 60%-70% of earnings on average, implying mid-single-digit growth over the next 10 years), we wouldn’t be surprised if Kimberly veered from its past bent and pursued acquisitions (at the right price) to enhance its technological capabilities, product/category exposure, and geographic reach.”

Erin Lash’s coverage of Kimberly-Clark stock is available here.

Six Undervalued Stocks With Dividend Increases

Table listing six undervalued stocks where the companies just raised dividends.
Source: Morningstar Direct.

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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