3 American Dividend Stocks Are Selling for Cheap

Stock investors looking to the US market for extra income and potential capital appreciation should check out these names

Adam Zoll 10 September, 2012 | 8:00AM
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For many income-oriented investors frustrated by the low payouts available from high-quality bonds, the search for added yield continues. Some investors who are willing to take on added risk are finding US stocks to be an attractive option. The S&P 500 index of large companies currently yields around 2.25%, and many dividend-paying stocks yield far more than that. Meanwhile, the Barclays Capital Aggregate Bond Index, a widely used proxy for the US investment-grade bond market, yields less than 2% currently, and most money market fund investors are barely in the black.

By investing in stocks that have sustainable competitive advantages, that pay healthy yields, and that currently sell below Morningstar's fair value estimates, investors willing to take on some equity risk can obtain a boost in yield and potentially some appreciation in stock prices as well.

For investors wary of the market or uncomfortable with the added risk inherent in moving money into stocks from cash or bonds, such a move might not be worth it. But for those willing to take the step, there are many quality American names that can help provide an income boost over what other investment classes are paying.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Exelon Corp49.65 USD0.55Rating
McDonald's Corp244.78 USD0.68Rating
Paychex Inc110.31 USD0.86Rating

About Author

Adam Zoll  is an assistant site editor with Morningstar.com, the sister site of Morningstar.co.uk.

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