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January 19, 2024 at 01:08 PM
Morningstar’s latest suggestions for investors looking for the best dividend stocks are 10 top constituents of the firm’s Dividend Yield Focus Index, a subset of its US Market Index.
In a blog post published Wednesday, Morningstar investment specialist Susan Dziubinski writes that these stocks have passed muster for quality as determined by their economic moat ratings of narrow or wide and uncertainty ratings of low, medium or high.
In addition, analysts have screened them for financial health using market information and accounting data to determine how likely a company is to default on its liabilities.
Dziubinski notes that Morningstar thinks that the best dividend stocks are not just the highest-yielding ones. Her colleague David Harrell, editor of Morningstar DividendInvestor, suggests that investors focus on companies with management teams that support their dividend strategies and favor those with competitive advantages, or economic moats.
“A moat rating does not guarantee dividends, of course, but we have seen some very strong correlations between economic moats and dividend durability,” Harrell says.
The best time to buy stocks with durable dividends is when they are cheap, according to Dziubinski. The companies in the new selection were undervalued as of Jan. 15, and each had a 4- or 5-star rating.
See the accompanying gallery for the best undervalued stocks with reliable dividends., according to Morningstar. One-year performance is as of Jan. 17.
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