By Ian Salisbury
Investors who love high-yield dividend stocks have to cope with a nagging fear: What if the dividend gets cut?
There are no guarantees, but you can get some assurance by looking for companies with strong track records and easy-to-defend business models.
To find some of those names, take a look at researcher Morningstar's latest list of 10 dividend aristocrats that its stock analysts say are undervalued and whose businesses boast a strong competitive advantage, known as a "moat."
A dividend aristocrat is a company that has paid and raised shareholder payouts consistently for the past 25 years, such as the 69 stocks in the ProShares S&P 500 Dividend Aristocrats exchange-traded fund. Morningstar defines a moat as a persistent competitive advantage, such as a strong brand or a social network, or scale and cost structure that rivals can't match.
Morningstar says its research shows that moats not only help companies to grow and maintain earnings, but also to avoid dividend cuts. "No-moat businesses are most likely to cut," states strategist Dan Lefkovitz in a note Wednesday.
Morningstar's picks aren't without their risks, of course. A number of the recommended companies have seen their share prices tumble in 2025 -- one big reason its analysts might think they are undervalued.
These include consumer names like liquor company Brown-Forman, Hormel Foods, and Clorox, which have all seen their stocks decline more than 25% this year. Also on the list is Kleenex maker Kimberly-Clark, which is down a more modest 7% in 2025.
Perhaps that should come as no surprise. With a government shutdown, lingering inflation, and tepid consumer sentiment, the Consumer Staples Select Sector SPDR is the worst performing of the 11 sector ETFs that make up the S&P 500. It has delivered a total return of just 0.08%, compared with more than 18% for the broad index.
Morningstar's picks also include names from other hard-hit sectors such as healthcare ( Becton Dickinson and Medtronic) and industrials ( Air Products & Chemicals and PPG Industries.) Check out all of Morningstar's picks below, along with what the firm's analysts believe are fair stock prices (fair value estimates) for these companies.
Morningstar's 10 Underpriced Dividend Stocks
Becton Dickinson / BDX
Dividend yield: 2.3%
Forward price-to-earnings ratio, or P/E: 13
Year-to-date total return: -18%
Stock price: $182
Morningstar fair value estimate: $270
Clorox / CLX
Dividend yield: 4.4%
Forward P/E: 19
YTD total return: -28%
Stock price: $113
Morningstar fair value estimate: $166
Brown-Forman / BF.B
Dividend yield: 3.3%
Forward P/E: 17
YTD total return: -25%
Stock price: $28
Morningstar fair value estimate: $40
Amcor / AMCR
Dividend yield: 6.3%
Forward PE: 10
YTD total return: -11%
Stock price: $8
Morningstar fair value estimate: $11.50
FactSet Research / FDS
Dividend yield: 1.6%
Forward P/E: 16
YTD total return: -42%
Stock price: $276
Morningstar fair value estimate: $385
Air Products & Chemicals / APD
Dividend yield: 2.8%
Forward P/E: 21
YTD total return: -11%
Stock price: $253
Morningstar fair value estimate: $321
Hormel Foods / HRL
Dividend yield: 5.2%
Forward P/E: 15
YTD total return: -26%
Stock price: $22
Morningstar fair value estimate: $29
Medtronic / MDT
Dividend yield: 3.1%
Forward P/E: 16
YTD total return: 18%
Stock price: $92
Morningstar fair value estimate: $112
PPG Industries / PPG
Dividend yield: 2.8%
Forward P/E: 13
YTD total return: -14%
Stock price: $101
Morningstar fair value estimate: $122
Kimberly-Clark / KMB
Dividend yield: 4.3%
Forward P/E: 16
YTD total return: -7%
Stock price: $119
Morningstar fair value estimate: $140
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
October 29, 2025 13:44 ET (17:44 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.