3 Dividend Stocks for September 2024

#Morningstar  #KHCStock #DividendStocks

We look at the dividend prospects of two narrow-moat companies and a wide-moat biopharma firm.

00:00 Introduction

00:10 Kinder Morgan KMI

00:50 Kraft Heinz KHC

01:29 Roche RHHBY

David Harrell: Hi. I’m David Harrell, editor of the Morningstar DividendInvestor newsletter. In this monthly series, we take a look at the dividend prospects of three stocks that are popular with income investors.

Kinder Morgan is one of the largest midstream energy companies in North America. The company slashed its dividend rate by 75% in 2016, but it has shown strong dividend growth since then. Morningstar equity analysts praise management for strengthening the balance sheet and restoring the dividend while “managing and investing in some of the largest energy projects in the US during the last several years.” They expect the annual dividend, currently $1.15 per share, to reach $1.26 per share in the next few years. The stock currently yields 5.4% and is trading close to its Morningstar fair value estimate of $22 a share.

Kraft Heinz was formed by the 2015 merger of Kraft and Heinz, which created the third-largest food and beverage manufacturer in North America. Its quarterly dividend rate was reduced to $0.40 from $0.625 in 2019, and it has remained there since then. However, Morningstar analysts believe that a resumption of dividend growth could begin in the current fiscal year, with mid-single-digit increases that would imply an average payout ratio of about 50% over their 10-year forecast period. The stock currently yields 4.5% and trades at more than a 35% discount to its $57 fair value estimate.

Like many non-US firms, Roche, the Swiss pharmaceutical and diagnostics firm, pays an annual dividend. It’s generally declared in March and paid later that month, though the 2024 dividend wasn’t paid until early May for US investors. The most recent dividend for the US ADR shares works out to a 3.2% yield based on the current share price. Morningstar analysts expect Roche to maintain a dividend payout ratio around 50% going forward, which implies mid-single-digit annual increases in the dividend rate, though the final payout received by US investors is influenced by exchange rates. US investors should also note that the dividend is subject to a Swiss withholding tax of 35%, which can be reduced to 15% via a tax-reclaim process. Please consult your brokerage firm and/or tax advisor for details. The stock is currently trading near a 25% discount to its fair value estimate.

I’m David Harrell from Morningstar DividendInvestor. Thanks for watching and we’ll see you next month.

What to watch from Morningstar.

3 Dividend Stocks for August 2024 https://youtu.be/YwwVDcW55ts?si=xzbUZ3n1fXhXj3hF

10 Dividend Stocks for Midyear https://youtu.be/WeGkUvy9pQc?si=ahohq9u8eniIF7zI

2 Undervalued Dividend Stocks the Best Managers Are Buying https://youtu.be/v5ov4hvN-tw?si=-_XaVCq–Xf-HUgV

3 High Dividend Stocks to Buy Before They Become Too Expensive https://youtu.be/CMguWt2PHRE?si=HmZgsH0KBx0v1kZN

Read what our team is writing.

David Harrell https://www.morningstar.com/authors/212/david-harrell

Facebook: https://www.facebook.com/MorningstarInc/

X: https://x.com/MorningstarInc

Instagram: https://www.instagram.com/

LinkedIn: https://www.linkedin.com/company/5161/