The 10 Best Dividend Stocks for Investors

 

 By Jurandir Coelho

 

"The dividend stocks on this list are among the index’s top constituents and were also undervalued by at least 5% as of October 4, 2024."

1.   Exxon Mobil XOM

2.   Chevron CVX

3.   AT&T T 

4.   Merck MRK  

5.   PepsiCo PEP  

6.   Altria MO  

7.   Medtronic MDT 

8.   Dow DOW

9.   LyondellBasell LYB

10 T. Rowe Price TROW

ExxonMobil

·         Trailing Dividend Yield: 3.04%

·         Industry: Oil and Gas Integrated

 "Exxon Mobil tops our list of the best dividend stocks to buy. Unlike its peers, which are shifting investments toward renewables to meet long-term carbon reduction goals, Exxon remains committed to oil and gas, explains Morningstar director Allen Good. He adds, 'While this strategy is unlikely to win praise from environmentally focused investors, we believe it is more likely to succeed and carries less risk.' Exxon is classified as a dividend aristocrat, meaning it has increased its dividend for 25 consecutive years or more. We estimate the stock's value at $135, with shares currently trading 8% below that." 

Chevron

·         Trailing Dividend Yield: 4.25%

·         Industry: Oil and Gas Integrated

 "Chevron, the second energy company on this month’s list of the best dividend stocks to invest in, is trading 14% below our fair value estimate of $176 per share. As the second-largest oil company in the United States, Chevron plans to acquire Hess, though arbitration around the acquisition has been delayed until 2025, adding some uncertainty to the stock. Despite this, we believe the stock remains attractive, says Morningstar’s Allen Good. 'We think Chevron presents a compelling investment case even without Hess, but with the acquisition, it gains another long-term growth driver that it currently lacks,' he adds. The company also qualifies as a dividend aristocrat."

AT&T

·         Trailing Dividend Yield: 5.07%

·         Industry: Telecom Services

 "The sale of DirecTV will allow AT&T to sharpen its focus on wireless and broadband. In 2023, AT&T's dividend consumed about 50% of its free cash flow. 'We believe the dividend policy is sensible, leaving ample excess cash to reduce leverage and invest in the network, which we see as critical to AT&T’s long-term health,' explains Hodel."

 

Merck

·         Trailing Dividend Yield: 2.81%

·         Industry: Drug Manufacturers—General

 "Merck is the first wide-moat company on our list of the best dividend stocks to invest in, with its stock trading 9% below our fair value estimate of $120 per share. 'Patents, economies of scale, and a strong intellectual property base bolster Merck’s business and protect it well from competition,' she explains. The company’s balance sheet is solid and carries low risk. We anticipate steady future dividends, supported by a payout ratio of nearly 50% relative to adjusted earnings per share, she adds."

PepsiCo

·         Trailing Dividend Yield: 3.12%

·         Industry: Beverages—Nonalcoholic

 "Pepsi is the third dividend aristocrat on this month’s list of the best dividend stocks to buy. We estimate Pepsi's stock is worth $176, with shares currently trading 5% below that. Despite near-term challenges from consumer belt-tightening in the U.S., we believe PepsiCo is well-positioned to strengthen its competitive standing in beverages and snacks by leveraging marketing and product initiatives. We expect Pepsi’s payout ratio to rise to 72%, with dividend payments increasing by 7% annually over the next decade, says Su."

Altria

·         Trailing Dividend Yield: 7.90%

·         Industry: Tobacco

 "Altria is the highest-yielding stock on this month’s list of the best dividend stocks to buy, currently trading 14% below our fair value estimate of $58 per share. As the leading tobacco manufacturer in the United States, the company’s efforts to diversify away from cigarettes have not been successful. Nevertheless, we expect Altria to continue raising prices to offset volume declines and achieve modest top-line growth. The company aims for mid-single-digit annual dividend growth."

Medtronic

·         Trailing Dividend Yield: 3.15%

·         Industry: Medical Devices

 "Medtronic stock is currently trading 21% below our fair value estimate of $112. As the largest pure-play medical device manufacturer, it serves as a key partner for its hospital customers, thanks to its diversified product portfolio targeting a wide range of chronic diseases. The company aims to return a minimum of 50% of its annual free cash flow to shareholders, but in recent years, this figure has been in the 60% to 70% range, says Wang. Medtronic has increased its dividend for 46 consecutive years, earning it the status of dividend aristocrat."

Dow

·         Trailing Dividend Yield: 5.06%

·         Industry: Chemicals

 "Dow is the most undervalued stock on our list of the best dividend stocks to buy, currently trading 23% below our fair value estimate of $72. As one of the largest chemical producers in the world, Dow has established a narrow economic moat due to the cost advantages of its ethylene and propylene manufacturing operations in North America. Recent results have been impacted by the firm’s industrial intermediates and infrastructure segment, which has suffered from soft construction activity. The company has consistently paid dividends of $2.80 per share over the past three years, and we expect it to maintain this payout moving forward."

LyondellBasell

·         Trailing Dividend Yield: 5.35%

·         Industry: Specialty Chemicals

 "LyondellBasell is currently trading 18% below our fair value estimate of $118. This petrochemical producer is the world’s largest manufacturer of polypropylene. We believe the company has established a narrow economic moat due to its cost advantages. LyondellBasell has increased its annual dividend payment for the past 12 consecutive years, averaging about 12.5% growth per year since 2012. 'Management prioritizes dividend growth as part of its capital allocation strategy,' adds Goldstein."

 

T. Rowe Price

·         Trailing Dividend Yield: 4.55%

·         Industry: Asset Management

 "T. Rowe Price completes our list of the best dividend stocks to buy, currently trading 6% below our fair value estimate of $115. We believe T. Rowe Price is one of the better-positioned U.S.-based traditional asset managers in the active segment of the industry. The company’s dividend payout is at the upper end of the historically observed 45%-55% range, but management remains committed to leveraging the firm’s strong financial position to grow its dividend, adds Warren. T. Rowe Price is also recognized as a dividend aristocrat."

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