Amid a tumultuous start to 2025 for the stock market, dividend-paying stocks continued to lag the broader market, despite their reputation as safe havens. However, this volatility could present opportunities for long-term investors looking to capitalize on discounts.
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 quarterly dividends, which can signal a company’s confidence in its future finances.
Here are six undervalued companies covered by Morningstar analysts that increased their dividends in January:
- Albertsons ACI
- Las Vegas Sands LVS
- Cigna Group CI
- Comcast CMCSA
- Eversource Energy ES
- Polaris PII
Screening for Undervalued Stocks That Raised Dividends
We started with the full list of US-based companies covered by Morningstar analysts, then looked for names that pay a quarterly dividend and declared a dividend payment in January. 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.
Six companies made it through the screen. A full list of stocks covered by Morningstar that raised dividends in January is at the bottom of this article.
Albertsons
- Morningstar Rating: ★★★★
- Fair Value Estimate: $25.00
- Fair Value Uncertainty: Medium
- Economic Moat: None
“Shareholder distributions also appear appropriate, as the firm’s $0.48 annual dividend per share (equating to about a 15% payout ratio) gives the firm plenty of financial flexibility to address upcoming debt maturities and potential pension obligations. That said, we have mixed feelings about Albertsons’ $3.9 billion special dividend payout in early-calendar 2023, which was partially funded with debt. We think the retailer could have used the cash to reduce its debt burden further or partly address the multiemployer pension underfunding, which may have given long-term investors more confidence in the firm’s outlook.”
—Noah Rohr, equity analyst
Las Vegas Sands
- Morningstar Rating: ★★★★
- Fair Value Estimate: $60.00
- Fair Value Uncertainty: High
- Economic Moat: Narrow
“We see Las Vegas Sands’ shareholder distribution as appropriate, as the company has a consistent record of paying dividends in non-pandemic years and has been opportunistic with share repurchases in the past, buying back its stock on pullbacks, when we find valuation at attractive levels.”
—Dan Wasiolek, senior equity analyst
Cigna Group
- Morningstar Rating: ★★★★
- Fair Value Estimate: $357.00
- Fair Value Uncertainty: Medium
- Economic Moat: Narrow
“After deleveraging from the Express Scripts acquisition, we view Cigna’s balance sheet as sound, and we think it remains financially flexible. In fact, just a couple of years after the Express Scripts merger, Cigna’s financial flexibility had improved enough to boost its shareholder distributions to appropriate levels. Specifically in early 2021, the firm initiated a moderate dividend for shareholders. Additionally, the firm’s share repurchase activity increased substantially in 2020, when its stock was cheap in our opinion, and we expect more repurchases going forward, which look likely to be made at reasonable levels if recent share prices persist. Overall, Cigna’s financial flexibility appears to have rebounded substantially since the Express Scripts merger was completed, and the company appears to be appropriately pushing more cash out to shareholders as a result.”
—Julie Utterback, senior equity analyst
Comcast
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $49.00
- Fair Value Uncertainty: Medium
- Economic Moat: Narrow
“We give Comcast a Standard Capital Allocation Rating. We believe the firm’s balance sheet is sound and shareholder returns are generally appropriate. The firm instituted a dividend in 2008 as the business started to generate strong cash flows and has increased its payout tenfold since then.”
—Michael Hodel, sector director
Eversource Energy
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $73
- Fair Value Uncertainty: Low
- Economic Moat: None
“We assign Eversource a Standard Capital Allocation rating based on management’s ability to navigate challenging regulation while growing earnings and the dividend.”
—Travis Miller, strategist
Polaris
- Morningstar Rating: ★★★★★
- Fair Value Estimate: $75.00
- Fair Value Uncertainty: Medium
- Economic Moat: Wide
“We deem cash distributions as appropriate, with the management team returning capital to shareholders when optimal. As such, it suspended share repurchases early in the covid-19 cycle but restarted opportunistic purchases when demand persisted during the pandemic (providing such flexibility). Polaris has consistently raised its dividend in recent years and expects to lift its payment in the years ahead, maintaining its dividend aristocrat status.”
—Jaime M. Katz, CFA, 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.
