10 Dividend Growers Whose Stocks Look Cheap

Constellation Brands (David Paul Morris/Bloomberg)

Key Points

• Morningstar identified undervalued stocks with healthy, growing dividends, based on criteria including five years of dividend increases and competitive advantages.
• Brown-Forman trades at 16 times forward earnings, its lowest in a decade, and yields 3.4%.
• Nike offers a 2.3% yield, with Morningstar estimating its fair value at $104 compared to its current price of $69.

Dividend investors love income—the key is to find stocks that also have a chance to appreciate in value.

But it isn’t easy to find stocks with a decent payout these days. The average yield of stocks in the S&P 500 is just 1.2%, close to its lowest level in more than 20 years. A big reason is the outperformance of large-cap growth stocks, like the Magnificent 7, which tend to payout little or nothing in the way of dividends.

Fortunately, there are plenty of stocks with healthy, growing dividends that are also undervalued, according to a recent report from Morningstar. The research firm ran a screen of stocks that raised their dividends over the past five years, pay out no more than 75% of earnings, and enjoy a solid competitive “moat” that should give them a consistent advantage over competitors. They also trade at discounts to Morningstar’s estimate of their fair value.

Among the 10 companies on the list, two are alcohol companies: Constellation Brands , which sells Corona and Modelo beer, and Brown-Forman, which sells Jack Daniels.

Drink makers have struggled recently, in part because Gen Z doesn’t seem to tipple quite as much as previous generations. Fears about tariffs haven’t helped.

Brown-Forman stock, down nearly 30% year to date, tumbled 15% after reporting disappointing fourth-quarter earnings in June. While the company has warned of continued headwinds in 2026, analysts forecast a return to solid mid-single-digit profit growth, in percent terms, in 2027 and 2028.

At the same time, the Jack Daniels maker’s shares trade at just 16 times forward earnings, their lowest level in a decade, and yield 3.4%. Morningstar puts the stock’s fair value at $40, nearly 50% above today’s prices of $27.

Other consumer products companies also make the list, such as home goods company Fortune Brands Innovations and Nike .

Nike has struggled for years with a host of problems. It’s another historically cheap stock that analysts say could see profits rebound in 2027. Investors who are willing to ride out the problems can take advantage of its 2.3% yield.

Morningstar estimates Nike’s fair value is $104, compared to today’s price around $69.

The full list also includes: Chemicals companies Albermarle and Eastman Kodak ; communications firms Comcast and Omnicom; insurance company Elevance Health; and fintech firm MarketAxess Holdings.

Write to Ian Salisbury at ian.salisbury@barrons.com