10 Dividend Stocks to Buy Now: Morningstar

  Morningstar has a simple suggestion for investors who want to choose the best dividend stocks to buy now, Susan Dziubinski, the firm's investment specialist, wrote in a recent blog post. Rather than chase yield, choose stocks whose dividends are durable and reliable, and buy them when they are undervalued. Dziubinski's colleague David Harrell, editor of the Morningstar DividendInvestor newsletter, suggests that investors focus on companies with management teams that are supportive of their dividend strategies and favor those with competitive advantages, or economic moats. "A moat rating does not guarantee dividends, of course, but we have seen some very strong correlations between economic moats and dividend durability," Harrell said. Analysts looked for the best dividend stocks among the 75 high-yielding stocks on the Morningstar Dividend Yield Focus Index, a subset of the firm's U.S. Market Index. Only securities whose dividends are qualified income are included; real estate investment trusts are excluded. They then screen companies for quality, choosing those that earn a narrow or wide moat rating and those with a low, medium or high uncertainty rating; they exclude companies with very high or extreme uncertainty ratings. The index includes a screen for financial health with a distance-to-default measure, which uses market information and accounting data to determine how likely a firm is to default on its liabilities. It is a measure of balance-sheet strength. See the gallery for the top 10 dividend stocks, which are among the index's top constituents. They have Morningstar Ratings of 4 and 5 stars and were undervalued as of Dec. 13. Year-to-date performance is as of midday Dec. 19. Credit: Adobe Stock