![]() The first of two financial names on our list of cheap dividend-growth stocks to buy, Discover Financial Services fell along with many other financial stocks earlier this year in the wake of the regional banking crisis. Polaris stock is undervalued, trading 43% below our $160 fair value estimate. Although macroeconomic headwinds will likely persist, we find shares attractive at this margin of safety and we expect the company to continue to grow the dividend, she adds. Morningstar senior analyst Jaime Katz notes that third-quarter earnings disappointed, marked by higher costs and lower sales-though the firm did take market share during the period. Polaris is the first of three new stocks on our list of cheap dividend-growth stocks to buy. Morningstar Capital Allocation Rating: Exemplary. ![]() This cheap dividend-growth stock trades 46% below our $500 fair value estimate. Third-quarter earnings disappointed, but we still view Lithia’s growth runway as excellent, he adds. Whiston calls the balance sheet “healthy” and commends the firm for raising its dividend in 2020 despite the coronavirus pandemic. This rural focus gives Lithia pricing power and contributes to the company’s economic moat, says Morningstar strategist David Whiston. Lithia Motors sells new and used vehicles and provides related services, often in rural markets where there are no competitors within 100 miles. That being said, Utterback expects Baxter to resume growing its dividend in line with earnings once the firm hits its leverage target, and we think the stock looks cheap, trading 46% below our $67 fair value estimate. Perhaps more troubling for dividend-growth aficionados, the company will slow the growth of its dividend as it integrates the Hillrom deal, which negatively affected its net leverage. However, supply chain disruptions and economic uncertainty stalled Baxter in 2022 more so than some of its peers, observes Morningstar senior analyst Julie Utterback. True, the firm can claim top-tier positions in most of its product lines and benefits from switching costs, which underpin its narrow economic moat rating. Of the dividend-growth stocks on our list, Baxter International may require a longer-term mindset than some others. ![]()
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