After a nine-year rally in U.S. stocks, some investors are starting to rotate away from high-growth, high-risk stocks and into the relative safety of dividend-paying value stocks. Unfortunately, the Standard & Poors 500 index’s price-to-earnings ratio is currently 25.2, roughly 60 percent above its historical average. In other words, it takes some digging to find decent value these days. Morningstar recently compiled a list of stocks with the one-two punch of growing dividends and compelling values. Here are seven value stocks to buy with dividend yields of at least 2 percent and a history of raising dividend payouts.
Cardinal Health
Analyst Vishnu Lekraj says the pharmaceutical industry may experience some major changes in coming years, but there will always be demand for inexpensive drug sourcing and delivery. Cardinal Health, Inc. (CAH) specializes in drug wholesaling, making the company a key partner for both drug manufacturers and retail pharmacies. Lekraj projects Cardinal will expand its operating margins by 0.25 percent to 2.49 percent by fiscal 2022. Cardinal has a 3.6 percent dividend yield and a five-year average dividend growth rate of 10.2 percent. Morningstar has an “undervalued” rating and $82 fair value estimate for CAH stock.
2. General Mills
General Mills, Inc. (GIS) has a dominant 30 percent market share of the U.S. ready-to-eat cereal market and an 18 percent share of the yogurt market. Analyst Sonia Vora says General Mills will likely ramp up its advertising and research budget to above 7 percent of total sales over the next decade as it develops and launches new products to fend off private-label competition. General Mills has a 4.2 percent dividend yield and a five-year average dividend growth rate of 0.6 percent. Morningstar has an “undervalued” rating and $59 fair value estimate for GIS stock.
3. BlackRock
BlackRock, Inc. (BLK) is the largest asset manager in the world, with more than $6.3 trillion in total assets under management. Analyst Greggory Warren says BlackRock’s size and diversification are unique and provide long-term stability during cyclical downturns in individual asset classes and/or shifts in market behavior. Even at its massive size, BlackRock has consistently delivered annual organic growth of above 4 percent. BlackRock has a 2.5 percent dividend yield and a five-year average dividend growth rate of 8.2 percent. Morningstar has an “undervalued” rating and $600 fair value estimate for BLK stock.
4. Franklin Resources
With more than $724.1 billion in total AUM, Franklin Resources, Inc. (BEN) is…
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