3 Dividend Stocks for January 2026

Key Concepts

• Dividend Yield: Annual dividend payment divided by the stock price, expressed as a percentage.
• Free Cash Flow (FCF): Cash flow available to the company after accounting for capital expenditures.
• Payout Ratio: Percentage of earnings or free cash flow paid out as dividends.
• Fair Value Estimate: An assessment of a stock’s intrinsic worth, determined by Morningstar analysts.
• Dividend Growth Rate: The rate at which a company increases its dividend payments over time.
• Spin-off: The creation of an independent company from a division of a parent company.

Comcast Dividend Prospects

Comcast (telecommunications and entertainment conglomerate) recently increased its dividend by 6.5% for its second payout of 2025. However, despite this increase, the stock’s dividend yield has risen significantly – by 40%, from 3.3% to 4.7% over the past year – primarily due to a decline in share price during 2025. During the October 30th earnings call, Comcast’s CFO highlighted that the current dividend yield is a multiple of the broader market yield, a statement typically indicative of limited potential for substantial near-term dividend increases.

The recent spin-off of cable channels under the Versant banner introduces uncertainty, potentially leading to a pause in future dividend growth, although Comcast maintains the spin-off won’t directly impact the current dividend. Morningstar analysts confirm the current dividend is adequately covered by free cash flow. However, they note that rising cash taxes and increased capital spending – driven by network upgrades and theme park expansion – are constraining free cash flow growth. Despite these constraints, the dividend currently consumes less than 40% of free cash flow, providing Comcast with “ample strategic flexibility.” Currently, Comcast shares trade at a 30% discount to Morningstar’s $42 fair value estimate, earning a five-star rating.

Campbell Soup Company Dividend Analysis

Campbell Soup Company has experienced modest dividend growth, averaging 1.9% annually over the past five years. The company has also implemented periods of flat dividend rates between increases, with the most recent raise being 5.4% in December 2024. The stock currently yields approximately 6%, significantly higher than its five-year average of 3.3%, a result of a share price decline exceeding 40% over the last five years.

Morningstar analysts project improved dividend growth over the next decade, forecasting annual increases in the high single-digit range through fiscal 2035, while maintaining a payout ratio around 60%. Campbell shares are also trading in five-star territory, priced at less than half of Morningstar’s $60 fair value estimate.

UPS Dividend Sustainability Assessment

United Parcel Service (UPS) currently offers a dividend yield of 6.2%, with a strong five-year annualized dividend growth rate of 11.2%, largely influenced by a substantial 49% increase in 2022. Recent dividend increases have been considerably smaller. The current annual dividend rate of $6.56 results in a payout ratio exceeding 100%, surpassing the company’s free cash flow over the past 12 months.

During the October 28th earnings call, the CFO indicated expectations for cash flow to exceed the annual dividend amount in the near future. Morningstar analysts view the 2022 dividend increase as “somewhat ambitious” and, while not explicitly modeling a dividend cut, acknowledge it as a growing risk. They believe UPS’s healthy balance sheet allows it to sustain the current dividend, but anticipate a potential board decision to reduce the dividend to align with a targeted 50% payout ratio. A dividend cut, all else being equal, wouldn’t affect their $113 fair value estimate, but could trigger short-term share price volatility. UPS currently trades at a modest discount to this estimate, earning a three-star rating.

Logical Connections & Overall Takeaways

The analysis highlights a common theme: rising dividend yields often accompany declining share prices, signaling potential risks or opportunities. While Comcast and Campbell present relatively stable dividend prospects supported by strong financial positions and analyst forecasts, UPS exhibits a higher degree of risk due to its elevated payout ratio. The Morningstar framework emphasizes the importance of considering both dividend yield and underlying financial health – specifically free cash flow and payout ratios – when evaluating dividend stocks. The ratings (five-star for Comcast and Campbell, three-star for UPS) reflect this comprehensive assessment.

As David Herrell states, “We’ll see you next month,” indicating this is a recurring series providing ongoing dividend stock analysis. The consistent application of Morningstar’s methodology provides a valuable resource for income investors.