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Deep Dive: 29 undervalued dividend stocks in all U.S. sectors

With dividend stocks hot this year, some market experts are advising investors to be cautious and selective. Identifying companies with room to raise dividends significantly, rather than focusing on finding the highest yields, might be your best way forward.

That theme was explored by MarketWatch writer Jeff Reeves and Bob Phillips, managing principal of Spectrum Management Group. Interestingly, there was some overlap between their stock recommendations.

Phillips said the most important factor when considering a dividend stock is the likelihood of big dividend increases over time. Rising dividends are much more likely if a company’s free cash flow (remaining cash flow after capital expenditures) leaves plenty of so-called headroom for higher dividend payouts.

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