Financial markets and the geopolitical environment are rife with turmoil. That may have you searching for investments that can weather the volatility.
One possibility is dividend stocks. They can offer steady – and sometimes rising – payouts. They may fall less than other stocks in a broad market decline and offer the possibility of capital gains when the market rebounds.
Morningstar created a list of dividend stocks that it sees as substantially undervalued and as having wide moats. The list follows, in order of the ratio of the stock’s actual recent price to Morningstar’ fair value estimate.
· Compass Minerals (CMP), a salt and fertilizer producer. Actual share price: $43.97, Morningstar fair value estimate: $85. Ratio: 52%
· Polaris (PII), a recreation and utility vehicle maker. Actual share price: $104.13, Morningstar fair value estimate: $184. Ratio: 57%.
· Comcast (CMCSA), the media/telecommunications giant. Actual share price: $44, Morningstar fair value estimate: $60. Ratio: 73%.
· BlackRock (BLK), the world’s largest money manager. Actual share price: $666.68, Morningstar fair value estimate: $880. Ratio: 76%.
Compass Analysis
As for Compass, Morningstar analyst Seth Goldstein cut his fair value estimate from $90 in May.
The company’s latest quarterly results suffered from cost inflation, as adjusted earnings before interest, taxes, depreciation and amortization fell 42% from a year earlier, he wrote in a commentary.
“We have reduced our near-term outlook as we expect cost inflation will weigh on results for the remainder of the year. We have also reduced our salt volume outlook.”
Still, “we expect Compass will be able to raise prices to restore the profitability of its salt business for 2023,” Goldstein said. And overall, “Compass Minerals holds an enviable portfolio of cost-advantaged assets,” he said.
Polaris Analysis
Turning to Polaris, it’s one of the longest-lived brands in power sports. “Its brands, innovative products, and lean manufacturing” justify Morningstar’s wide-moat designation for the company, Morningstar analyst Jaime Katz wrote in a commentary.
“It stands to capitalize on its research and development, solid quality, operational excellence, and acquisition strategy.
“However, Polaris' brands do not benefit from switching costs,” she said. “And with peers innovating more quickly than in the past, it could jeopardize the firm's ability to take price and share consistently, particularly in periods of inflated recalls or aggressive industry discounting.”
Katz anticipates “modest market share gains to ensue ahead, signaling the firm's competitive edge is intact.”
The author of this story owns shares of BlackRock and Comcast.
