3 Cheap and Dependable Dividend-Growth Stocks to Buy (2024)

These dividend growers look undervalued today.

Susan Dziubinski: I’m Susan Dziubinski with Morningstar.

Dividend-growth stocks are attractive to many investors. After all, companies with growing dividends are typically profitable and financially healthy—two qualities investors prioritize during economic slowdowns. Dividend-growth companies are also more likely to have competitive advantages that may allow them to pass along price increases and thereby maintain margins during periods of higher inflation.

Today, we’re looking at three dividend-growth stocks included in the Morningstar US Dividend Growth Index that look undervalued. Stocks included in this index are from companies with a history of dividend growth and an ability to sustain that growth.

1. Bristol-Myers Squibb BMY
2. Nike NKE
3. Gilead Sciences GILD

Our first cheap and dependable dividend-growth stock is Bristol-Myers Squibb. This drugmaker has carved out a wide economic moat thanks to its lineup of patent-protected drugs, an entrenched salesforce, and economies of scale. Bristol is aggressively repositioning itself to expand through challenging patent losses. The company has shed its diabetes business, medical imaging group, wound-care division, and nutritional business in an effort to focus on its high-margin specialty drug group. We believe the dividend looks secure over the next several years with a current dividend payout ratio well below 50%, which is more typical of peers. We think the stock is worth $63.

The next cheap dividend-growth stock we like is Nike. Nike is the largest athletic footwear and apparel brand in the world, and Morningstar thinks the company has carved out a wide economic moat. Short term, the company is expecting sales declines thanks to subpar consumer demand. But Morningstar likes Nike as a long-term investment at current prices. We expect investments in products, marketing, and its supply chain will allow Nike to regain lost share and outpace market growth when sportswear demand improves. Plus, the company is in excellent financial shape. We think the stock is worth $129.

The final cheap and dependable dividend-growth stock we like is Gilead Sciences. With a portfolio of therapies to treat life-threatening infectious diseases, focusing on HIV and hepatitis B and C, we think this drugmaker has carved out a wide economic moat. While Gilead needs HCV market stabilization, strong continued innovation in HIV, solid pipeline data, and smart future acquisitions to return to growth, investors can pick up shares of this dividend-growth stock with a significant margin of safety at today’s prices. We think the stock is worth $97.

For more stock ideas be sure to subscribe to Morningstar’s channel and visit Morningstar.com.

Watch 3 Hot Stocks to Buy That Still Look Undervalued for more from Susan Dziubinski.

Morningstar director Damien Conover, strategist Karen Andersen, and senior analyst David Swartz provided the research behind this segment.