According to Morningstar investment specialist Susan Dziubinski, companies with a history of increasing dividends have recently underperformed the broader market. The Morningstar US Dividend Growth Index trailed the Morningstar US Market Index by nearly 3 percentage points over the past year. This underperformance is attributed to a narrow technology-led stock market.
Despite this, dividend-growth stocks have their advantages. These companies are typically profitable and financially healthy, making them resilient during uncertain economic times. They also tend to have competitive advantages that help them maintain margins during inflationary periods. Additionally, dividend-growth stocks are less volatile than the overall market, making them attractive for defensive investing.
Morningstar analysts have identified some undervalued dividend-growth stocks for investors to consider. These stocks have a history of increasing dividends, pay out no more than 75% of their earnings in dividends, and have competitive advantages. They are also trading at discounts to fair value estimates as of June 3.
For a list of 10 cheap dividend-paying stocks, check out the accompanying gallery. Performance data is accurate as of June 11.