The 10 best dividend stocks to buy according to Morningstar analysts

Quality dividend titles should be an essential component of any long-term portfolio because they are a relatively stable part of the equation called compound interest. As with all investments, however, you need to choose well. With these tips from experienced Morningstar analysts, you might just be able to do just that.

As mentioned in the introduction, in today's volatile economic environment, it's important for investors to choose dividend stocks very carefully. According to Morningstar experts such as Dan Lefkovitz, strategist for Morningstar Indexes, and David Harrell, editor of Morningstar Dividend Investor, investors should look for stocks with sustainable dividends and buy them when they are undervalued.

They say it's important to focus on companies with management that just supports a dividend strategy and favor companies with competitive advantages, or "moats." While this economic moat does not guarantee dividends, there is a strong correlation between just economic moats and dividend sustainability.

The following summary lists the top ten dividend stocks that are part of the Morningstar Dividend Yield Focus Index and were trading below fair value estimates as of June 2023. The descriptions also include direct comments from the Morninstar analyst team that prepared the list.

Verizon Communications $VZ

"This stock is trading at a 38% discount to our fair value estimate of $57 per share. We expect margins and cash flow to grow as network projects are completed and the advertising environment calms down. Verizon is the third largest dividend position in the Morningstar Dividend Index and approximately 50% to 60% of the company's free cash flow is dedicated to the dividend."

Pfizer $PFE

"Pfizer shares are trading about 16% below our fair value estimate of $48 per share. Pfizer is one of the most-held dividend stocks among Morningstar's Ultimate Stock-Pickers - top funds and asset managers we respect. We expect Pfizer to be able to offset patent losses over the next five years."

Cisco $CSCO

"The only technology company on our list, trading 9% below our fair value estimate of $56 per share. We expect Cisco to maintain its dominant position in enterprise networking. Cisco is known for its excellent shareholder return policy, dedicating more than half of its significant cash flow to dividends and share repurchases."

Comcast $CMCSA

"Comcast shares are trading 32% below our fair value estimate of $60 per share. We expect Comcast to maintain a strong position in the broadband market. Comcast instituted a dividend in 2008 and has averaged a 17% annual increase in its payout since then."

Amgen $AMGN

"This stock is trading about 17% below our fair value estimate. The company has a portfolio of innovative drugs in therapeutic areas ranging from cardiology to immunology. We recently raised our fair value estimate on Amgen stock to $268 because of the potential for a cure for obesity."

Medtronic $MDT

"Medtronic shares are trading 23% below our fair value estimate of $112 per share. The company is a key partner for its hospital customers with its diversified portfolio of products targeting a wide range of chronic diseases. Medtronic has increased its dividend for 45 consecutive years."

Gilead Sciences $GILD

"Gilead shares are trading about 19% below our fair value estimate of $97 per share. The company generates excellent profit margins from its portfolio of HIV and HCV drugs. The company has been gradually increasing its dividend; its payout ratio is around 50%, which is considered "reasonable."

Duke Energy $DUK

"Duke Energy shares are trading 14% below our fair value estimate of $105 per share. It is one of the largest regulated energy companies in the United States. Duke Energy is one of the 33 most undervalued stocks for the second quarter of 2023 according to Morningstar."

Blackstone $BX

"Blackstone shares are trading 14% below our fair value estimate of $105 per share. It is one of the world's largest alternative asset managers. Blackstone has a team with decades of experience in revitalizing companies through cost-cutting, acquisitions or other strategic initiatives."

Truist Financial $TFC

"Shares of Truist Financial are trading 40% below our fair value estimate of $54 per share. It is one of the larger regional banks in the US. Truist's first quarter results showed some, but still manageable, earnings pressure."

All of these companies offer attractive dividend yields and trade below fair value estimates, according to Morningstar's analyst team, which is important for investors looking for value and stable dividend yields.

As also mentioned in the article's introduction, these analyst comments are from June, so some values may vary. Of course, in some cases, to the benefit of investors, if these stocks have continued to decline in value, it is only because of the volatility of the market itself, not because of a change in the fundamentals of the stock in question.

Of course, as always, the final choice is up to you and your investment strategy.