Amid the broad selloff that followed President Donald Trump’s announcement of tariffs against dozens of countries, many dividend-paying stocks have been caught up in the downdraft. However, dividend stocks could offer opportunities for long-term investors looking for performance and income in the volatile market.
Dividend investing comes in various forms. Investors can look for stocks with the highest yields, those with a history of stable dividend payouts and strong finances, or those raising dividends. We screened US stocks covered by Morningstar that have increased their quarterly dividends, which can signal a company’s confidence in its future finances.
Here are eight undervalued companies that increased their dividends in March:
- Oracle ORCL
- Applied Materials AMAT
- Toll Brothers TOL
- General Dynamics GD
- American Tower AMT
- FirstEnergy FE
- Americold Logistics COLD
- Equity Residential EQR
Screening for Undervalued US Stocks that Raised Dividends
We started with the full list of US-based companies covered by Morningstar analysts, then looked for those that pay a quarterly dividend and declared a dividend payment in March. We tracked changes from previous dividend payouts and filtered for companies that saw a dividend increase of 2% or more to capture the most substantial changes. Stocks with dividend yields under 2% were excluded. Lastly, we picked companies rated 4 or 5 stars by Morningstar analysts, meaning they are considered undervalued. These stocks offer investors the potential to benefit from increased dividend yields and the possibility that their investment values will grow.
Eight companies made it through the screen. A full list of stocks covered by Morningstar that raised dividends in March is at the bottom of this article.
Oracle
- Morningstar Rating: 4 stars
- Fair Value Estimate: $184.00
- Fair Value Uncertainty: High
- Economic Moat: Wide
“We think that Oracle has been fair with its allocation of capital toward dividends and share repurchases. Oracle has consistently increased its total annual dividends over the last 10 years, and we think dividends will remain an important channel for Oracle’s shareholder distributions. Given substantial ongoing investments in Oracle Cloud Infrastructure, we do not expect the payout ratio to increase over the next several years. Oracle also has an ongoing stock repurchase program, which was particularly effective in the decade following 2010, with the share count almost getting cut in half by 2022 at much lower prices than today; however, given the current setup, we think the most value will be created for shareholders from continuing internal investments.”
—Luke Yang, equity analyst
Applied Materials
- Morningstar Rating: 4 stars
- Fair Value Estimate: $193.00
- Fair Value Uncertainty: High
- Economic Moat: Wide
“Applied Materials’ balance sheet is strong, with a net cash position and long-dated debt maturities. It also generates good free cash flow, most of which it sends back to shareholders. Applied Materials has increased its dividend every year since 2018, and targets sending more than 80% of free cash flow back to shareholders, inclusive of buybacks.”
—William Kerwin, senior equity analyst
Toll Brothers
- Morningstar Rating: 4 stars
- Fair Value Estimate: $140.00
- Fair Value Uncertainty: High
- Economic Moat: None
“In our view, Toll Brothers’ shareholder distributions have been appropriate. Toll is one of a handful of public homebuilders that pays a dividend. The firm began paying a modest dividend in 2017 (payout ratio has averaged about 9%). The firm has also been repurchasing significant amounts of its stock since fiscal 2014. These purchases have generally been made when the stock traded below its long-term average price/book ratio and below our estimate of the stock’s intrinsic value.”
—Brian Bernard, sector director
General Dynamics
- Morningstar Rating: 4 stars
- Fair Value Estimate: $308.00
- Fair Value Uncertainty: Low
- Economic Moat: Wide
“We think General Dynamics deserves an appropriate shareholder distribution rating. General Dynamics is the only defense prime that has raised its dividend for 25 years, and it has historically delivered quite a bit of cash to shareholders, which we view favorably as we do not think the firm could accelerate growth with internal investment or has material value-accretive M&A opportunities. The trailing five-year compound growth rate of General Dynamics’ dividend per share is 8.4%. Simultaneously, the company delivered roughly $5.6 billion in cash to shareholders through share repurchases, which reduced the diluted weighted average share count over 2018-22 by about 7%. Given this solid history of delivering cash to the shareholder and the stability of the business model, we think long-term investors can expect these activities to continue.”
—Nicolas Owens, equity analyst
American Tower
- Morningstar Rating: 4 stars
- Fair Value Estimate: $237.00
- Fair Value Uncertainty: Medium
- Economic Moat: Narrow
“We believe that American Tower’s history of shareholder distributions is appropriate. As a REIT, American Tower must distribute 90% of its REIT taxable income. Dividends have been the focal point of management’s shareholder return strategy, and since 2021 the firm has increased its dividend per share at an average of 20% annually, with its payout ratio as a percentage of adjusted funds from operations averaging nearly 40%. Management has looked to repurchase shares at opportunistic periods, but repurchases have been minimal in comparison to the dividend payment, with $1.1 billion spent on share repurchases since 2017. We expect dividend growth to continue to be at the forefront of management’s shareholder distribution strategy, and expect American Tower to increase its dividend in the high-single digits through our forecast. Additionally, as management continues to invest in new towers, prioritize its dividend, and reduce its balance-sheet leverage, we model continued balance-sheet flexibility that permits management to repurchase shares if valuable.”
—Samuel Siampaus, equity analyst
FirstEnergy
- Morningstar Rating: 4 stars
- Fair Value Estimate: $44.00
- Fair Value Uncertainty: Low
- Economic Moat: Narrow
“We forecast FirstEnergy’s dividend payout between 60%-70%, which we feel is appropriate given the high quality and relatively stable nature of FirstEnergy’s regulated utilities.”
—Andrew Bischof, strategist
Americold Logistics
- Morningstar Rating: 5 stars
- Fair Value Estimate: $31.00
- Fair Value Uncertainty: Medium
- Economic Moat: None
“We assess the company’s capital return strategy as appropriate. The current dividend of $0.22 per quarter represented around 60% of the company’s 2024 adjusted funds from operations, which we think is an appropriate level for a REIT. We expect the dividend to increase over the next few years as AFFO grows at a healthy rate.”
—Suryansh Sharma, senior equity analyst
Equity Residential
- Morningstar Rating: 4 stars
- Fair Value Estimate: $80.00
- Fair Value Uncertainty: Medium
- Economic Moat: None
“We assess the company’s capital return strategy as appropriate, as Equity Residential has averaged a dividend payout ratio of 70% of normalized funds from operations the past several years. We think this is an appropriate level for a REIT, and while the payout ratio increased in 2020, high funds from operations growth led to the company returning to this level in 2022 as operations recovered from the pandemic.”
—Kevin Brown, senior equity analyst
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
