The 10 Best US Dividend Stocks

“It’s
really
critical
to
be
selective
when
it
comes
to
buying
dividend-paying
stocks
and
chasing
yield,”
explains
Dan
Lefkovitz,
a
strategist
for
Morningstar
Indexes.

“Looking
for
the
most
yield-rich
areas
of
the
market
can
often
lead
you
into
troubled
areas
and
dividend
traps
–
companies
that
have
a
nice-looking
yield
that
is
ultimately
unsustainable.
You
have
to
screen
for
dividend
durability
and
reliability
going
forward.”

David
Harrell,
the
editor
of
Morningstar
DividendInvestor,
suggests
focusing
on
companies
with
management
teams
that
are
supportive
of
their
dividend
strategies
and
favouring
companies
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.

Given
ongoing
economic
uncertainty
and
stock
market
volatility,
investors
looking
for
the
best
dividend
stocks
might
consider
adding
undervalued,
quality
dividend
stocks
to
their
portfolios.
After
all,
quality
companies
have
the
financial
stability
to
maintain
their
dividends
during
questionable
economic
periods,
and
price
risk
is
reduced
when
investors
can
buy
the
stocks
of
these
companies
on
the
cheap.

10
Best
Dividend
Stocks
to
Buy

To
find
the
best
dividend
stocks,
we
turn
to
the Morningstar
Dividend
Yield
Focus
Index.
The
dividend
stocks
on
this
list
are
among
the
index’s
top
constituents,
and
they
were
also
undervalued
as
of
June
7,
2024,
with
Morningstar
Ratings
of
4
and
5
stars.

1.
Exxon
Mobil (XOM)
2.
Verizon
Communications (VZ)
3.
Johnson
&
Johnson (JNJ)
4.
Comcast (CMCSA)
5.
Medtronic (MDT)
6.
Duke
Energy (DUK)
7.
PNC
Financial
Services (PNC)
8.
Kinder
Morgan (KMI)
9.
Devon
Energy (DVN)
10.
Dow (DOW)

Here’s
a
little
bit
about
each
cheap
dividend
stock,
along
with
some
key
Morningstar
metrics.
All
data
is
through
June
7,
2024.

Exxon
Mobil

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
High
•
Trailing
Dividend
Yield:
3.33%
•
Industry:
Oil
and
Gas
Integrated

Exxon
Mobil
returns
to
–
and
tops
–
our
list
of
the
best
dividend
stocks
to
buy.
In
early
May,
the
oil
giant
announced
it
closed
its
acquisition
of
Pioneer
Natural
Resources.
Morningstar
director Allen
Good calls
the
deal
“sound”,
noting
that
the
pickup
is
a
lean
into
the
firm’s
hydrocarbon-focused
strategy.
Although
Exxon
struggled
to
pay
its
dividend
in
2020,
Good
says
that
the
firm’s
recent
actions
to
reduce
costs
and
capital
spending
should
allow
the
company
to
meet
its
dividend
payments.
In
fact,
Exxon
qualifies
as
a
dividend
aristocrat;
dividend
aristocrats
are
those
companies
that’ve
raised
their
dividends
for
25
consecutive
years
or
more.
We
think
the
stock
is
worth
$138,
and
shares
trade
18%
below
that.

Verizon
Communications

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Medium
•
Trailing
Dividend
Yield:
6.47%
•
Industry:
Telecom
Services

Verizon
is
the
highest-yielding
stock
on
our
list
of
the
best
dividend
stocks
to
buy,
trading
24%
below
our
fair
value
estimate
of
$54
per
share.
We
think
the
market
is
overly
focused
on
Verizon’s
challenges
to
add
postpaid
consumer
wireless
customers,
says
Morningstar
director Mike
Hodel.
Hodel
argues
that
the
improving
competitive
balance
in
the
wireless
industry
will
allow
the
major
US
carriers
to
boost
profitability
in
the
years
ahead. Verizon’s
first-quarter
results showcased
robust
wireless
revenue
growth,
thanks
to
recent
price
increases
that
drove
higher
sales
without
significantly
higher
customer
defections.
Hodel
observes
that
Verizon
directed
60%
of
2023′s
cash
flows
to
the
dividend.

Johnson
&
Johnson

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Wide
•
Morningstar
Uncertainty
Rating:
Low
•
Trailing
Dividend
Yield:
3.27%
•
Industry:
Drug
Manufacturers
–
General

Johnson
&
Johnson
is
another
dividend
aristocrat
on
our
list
of
cheap
dividend
stocks.
The
stock
is
trading
about
10%
below
our
fair
value
estimate
of
$164
per
share.
With
a
diverse
revenue
base,
solid
pipeline,
and
exceptional
cash
flow,
the
company
earns
a
wide
economic
moat
rating,
says
Morningstar
director Damien
Conover.
Conover
notes
that
the
market
is
underestimating
the
company’s
solid
pipeline
and
argues
that
the
company’s
recently
updated
strategy
to
resolve
talc
litigation
should
resolve
the
risk
hanging
over
the
stock.
He
calls
Johnson
&
Johnson’s
dividends
(and
share
repurchases)
“about
right”.

Comcast

•
Morningstar
Rating:
5
stars
•
Morningstar
Economic
Moat
Rating:
Wide
•
Morningstar
Uncertainty
Rating:
Medium
•
Trailing
Dividend
Yield:
3.03%
•
Industry:
Telecom
Services

Comcast
stock
trades
30%
below
our
$56
fair
value
estimate.
Morningstar’s
Hodel
argues
that
pricing
power
remains
the
most
important
factor
driving
Comcast’s
performance.
Accepting
modest
customer
losses
while
maintaining
steady
growth
in
revenue
per
customer
has
helped
to
offset
uncertainty
around
the
company’s
Peacock
streaming
service.
Comcast
instituted
a
dividend
in
2008
and
has
increased
its
payout
by
15%
annually,
on
average,
notes
Hodel.
We
think
the
balance
sheet
is
sound,
and
shareholder
returns
are
generally
appropriate.

Medtronic

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Medium
•
Trailing
Dividend
Yield:
3.28%
•
Industry:
Medical
Devices

Medtronic
stock
trades
25%
below
our
$112
fair
value
estimate.
The
largest
pure-play
medical-device
maker
is
a
key
partner
for
its
hospital
customers,
thanks
to
its
diversified
product
portfolio
aimed
at
a
wide
range
of
chronic
diseases,
Morningstar
senior
analyst Debbie
Wang explains.
Medtronic
has
raised
its
dividend
for
46
consecutive
years,
earning
it
dividend
aristocrat
status.

Duke
Energy

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Low
•
Trailing
Dividend
Yield:
4.00%
•
Industry:
Utilities
–
Regulated
Electric

Duke
Energy
stock
is
trading
8%
below
our
$112
fair
value
estimate.
One
of
the
largest
regulated
utilities
in
the
United
States,
Duke
has
carved
out
a
narrow
economic
moat
because
of
the
constructive
regulatory
environments
in
which
much
of
its
regulated
business
operates
and
better-than-average
economic
fundamentals
in
its
key
regions,
explains
Morningstar
strategist Andrew
Bischof.
The
company’s
balance
sheet
is
strong,
and
its
dividend
policy
to
pay
out
65%
to
75%
of
earnings
is
appropriate,
he
adds.

PNC
Financial
Services

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Medium
•
Trailing
Dividend
Yield:
3.98%
•
Industry:
Banks
–
Regional

PNC
Financial
Services
is
the
only
bank
on
our
list
of
the
best
dividend
stocks
to
buy.
One
of
the
larger
regional
banks
in
the
US,
PNC
has
a
fairly
diversified
fee
base,
notes
Morningstar
analyst Suryansh
Sharma.
We
think
its
balance
sheet
is
well
positioned
for
the
current
interest-rate
cycle,
he
adds.
PNC’s
capital
return
strategy
has
been
appropriate
from
Morningstar’s
perspective.
PNC
stock
trades
11%
below
our
fair
value
estimate
of
$175
per
share.

PNC
1Q
Earnings:
Expenses
Are
Well-Managed;
Net
Interest
Income
Will
Worsen
Before
Seeing
Improvement

Kinder
Morgan

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Medium
•
Trailing
Dividend
Yield:
5.78%
•
Industry:
Oil
and
Gas
Midstream

Kinder
Morgan’s
assets
span
natural
gas,
natural
gas
liquids,
oil,
and
liquefied
natural
gas,
but
we
think
the
company’s
US
gas
pipeline
business
is
most
impressive,
observes
Morningstar
strategist Stephen
Ellis.
Ellis
also
notes
that
Kinder
Morgan
will
enjoy
growth
opportunities
from
artificial
intelligence
and
data
centre
demand.
We
anticipate
a
2%-3%
dividend-growth
rate
ahead.
We
think
the
stock
is
worth
$22,
and
shares
trade
11%
below
that.

Devon
Energy

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
High
•
Forward
Dividend
Yield:
9.46%
•
Industry:
Oil
&
Gas
E&P

Devon
Energy
is
the
second
newcomer
this
month
to
our
list
of
the
best
dividend
stocks,
with
its
stock
trading
16%
below
our
fair
value
estimate
of
$56
per
share.
Devon
Energy
is
one
of
the
largest
exploration
and
production
companies
in
the
United
States.
Given
its
cost
advantages,
we
assign
the
firm
a
narrow
economic
moat
rating,
explains
Morningstar
director Josh
Aguilar.
We
think
the
balance
sheet
is
relatively
strong,
and
like
many
E&P
firms,
Devon
Energy
follows
a
“fixed
plus
variable”
dividend
strategy,
which
calibrates
its
returns
to
shareholders
with
the
commodity
cycle,
he
adds.

Dow

•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Medium
•
Trailing
Dividend
Yield:
5.02%
•
Industry:
Chemicals

Dow
rounds
out
our
list
of
the
best
dividend
stocks,
trading
18%
below
our
$68
fair
value
estimate.
One
of
the
largest
chemicals
producers
in
the
world,
Dow
has
carved
out
a
narrow
economic
moat
owing
to
the
cost
advantages
of
its
ethylene
and
propylene
manufacturing
operations
in
North
America,
explains
Morningstar
strategist Seth
Goldstein.
Demand
appears
to
be
recovering,
and
as
profits
rebound,
we
expect
improved
market
sentiment
to
drive
shares
closer
to
our
fair
value
estimate,
says
Goldstein.
The
company
has
paid
dividends
of
$2.80
per
share
in
the
past
three
years,
which
implies
a
2024
payout
ratio
of
60%
–
though
we
think
management
will
prioritize
the
dividend
moving
forward,
he
adds.

What
Is
the
Morningstar
Dividend
Yield
Focus
Index?

A
subset
of
the

Morningstar
US
Market
Index
(which
represents
97%
of
equity
market
capitalisation),
the
Morningstar
Dividend
Yield
Focus
Index
tracks
the
top
75
high-yielding
stocks
that
meet
our
screening
requirements
for
quality
and
financial
health.

How
are
the
stocks
selected
for
the
index?
Only
securities
whose
dividends
are
qualified
income
are
included;
real
estate
investment
trusts
are
tossed
out.
Companies
are
then
screened
for
quality
using
the Morningstar
Economic
Moat
Rating and Morningstar
Uncertainty
Rating.
Specifically,
companies
must
earn
a
moat
rating
of
narrow
or
wide
and
an
Uncertainty
Rating
of
Low,
Medium,
or
High;
companies
with
Very
High
or
Extreme
Uncertainty
Ratings
are
excluded.
The
index
includes
a
screen
for
financial
health
using
a
distance-to-default
measure,
which
uses
market
information
and
accounting
data
to
determine
how
likely
a
firm
is
to
default
on
its
liabilities;
it
is
a
measure
of
balance-sheet
strength.

The
75
highest-yielding
stocks
that
pass
the
quality
screen
are
included
in
the
index,
and
constituents
are
weighted
according
to
the
total
dividends
paid
by
the
company
to
investors.

The
Best
Dividend
Stock
Leaders:
More
Ideas
to
Consider

Investors
who
would
like
to
uncover
more
top-performing
or
cheap
dividend
stocks
to
research
further
can
do
the
following: 

•
Review
the
full
list
of
Dividend
stocks
included
in
the Morningstar
UK
Dividend
Yield
Focus index.
Those
dividend
stocks
with
Morningstar
Ratings
of
4
or
5
stars
are
undervalued,
according
to
our
metrics.

• Read
our
monthly
analysis
of
the
latest
dividend
moves among
the
top
FTSE
100
dividend
payers.

•
Use
our Morningstar
Screener tool
to
find
the
best
dividend
stocks
according
to
your
specific
criteria.
You
can
search
for
stocks
based
on
their
dividend
yields,
valuation
measures
such
as
price/earnings,
and
more.

•
Use Morningstar
Portfolio
Manager to
build
a
watchlist
of
the
best
dividend
stocks
and
create
a
view
that
allows
you
to
easily
follow
the
valuations,
ratings,
and
dividend
yields
of
the
stocks
in
your
list.

This
article
first
ran
on
Morningstar.com
and
has
been
adapted
for
a
UK
audience.

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