Some companies raised their dividends in sync with their second-quarter-earnings reports.
So Morningstar put together a list of stocks that did so and also are undervalued according to Morningstar fair value estimates.
“We filtered for companies that saw a dividend increase of 5% or more to capture the most substantial changes,” Morningstar said. Stocks with dividend yields under 2% were excluded from the group.
“We found 24 companies that made the cut. However, 10 of them were featured in our Aug. 2 screen and excluded from this,” Morningstar said. Here are the five that had the highest dividend increases.
The Formidable Fivesome
1. Tapestry (TPR) -), a fashion company, including the Coach brand
Morningstar moat (durable competitive advantage) rating: narrow. Morningstar fair value estimate: $57. Thursday price quote: $31. Forward dividend yield: 2.8%.
“Tapestry has successfully restructured Coach (74% of fiscal 2022 revenue) but needs to prove the value of Kate Spade and Stuart Weitzman,” wrote Morningstar analyst David Swartz. Tapestry’s brands suffered during the pandemic but are now coming back quickly, he said.
2. Skyworks Solutions (SWKS) -), a semiconductor maker
Morningstar moat rating: narrow. Morningstar fair value estimate: $155. Thursday price quote: $98.75. Forward dividend yield: 2.3%.
“Skyworks Solutions is a leading supplier of a variety of radio frequency components to smartphone makers and a host of other electronics device makers,” wrote Morningstar analyst Brian Colello.
“Although the company faces an intense competitive landscape, it should thrive as the handset industry focuses on 5G devices.”
3. Bank of America (BAC) -)
Morningstar moat rating: wide. Morningstar fair value estimate: $35. Thursday price quote: $29.35. Forward dividend yield: 3.1%.
“The bank has one of the best retail branch networks and overall retail franchises, is a Tier 1 investment bank, a top four credit card issuer, a top three acquirer, has a solid commercial banking franchise, and owns Merrill Lynch,” wrote Morningstar analyst Eric Compton.
4. Ingredion (INGR) -), a food/beverage ingredient maker
Morningstar moat rating: narrow. Morningstar fair value estimate: $120. Thursday price quote: $98.95. Forward dividend yield: 2.7%.
Ingredion manufactures starches and sweeteners by wet milling and processing corn and other starch-based raw materials.
“Ingredion is well positioned for steady, long-term profit growth,” wrote Morningstar analyst Seth Goldstein. “The company benefits from shifting consumer preferences that drive demand for Ingredion's specialty products, such as natural sweeteners.”
5. General Mills (GIS) -), the foods company
Morningstar moat rating: narrow. Morningstar fair value estimate: $78. Thursday price quote: $66. Forward dividend yield: 3.1%.
“The firm is the U.S. market leader in cereal, dessert mixes, refrigerated dough, snack bars, and natural pet food and is No. 2 in soup,” wrote Morningstar analyst Jaime Katz. “It has historically gained or maintained share in its global platforms, even as its brands command price premiums.”
The author of this story owns shares of Bank of America.
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