For most people throughout most of recorded human history, freedom has been elusive.

This lack of freedom has taken on many forms: physical, political, financial, etc.

Restrictive, hierarchical, and often despotic systems have persistently and severely limited freedoms for billions of average people for thousands of years.

However, in 2026, freedoms of all kinds can be had.

And the type of freedom that might be most worth having is financial freedom.

From this stems all kinds of other freedoms, such as the freedom to do what you want where you want.

There are a lot of investment strategies one could employ in the pursuit of financial freedom, but I’ve found dividend growth investing to be the most direct and effective of all.

This is a long-term investment strategy whereby one buys and holds shares in great businesses paying safe, growing cash dividends to shareholders.

You can find hundreds of examples by perusing the Dividend Champions, Contenders, and Challengers list – a compilation of US-listed stocks that have raised dividends each year for at least the last five consecutive years.

Businesses that are so great that they can consistently generate ever-more profits necessary to afford ever-larger cash dividend payouts for years or decades on end tend to naturally be great long-term investments.

By investing new capital, logging dividend raises, and reinvesting growing dividends, that puts one on a path to possibly one day generate enough dividend income to live off of – reaching the promised land of financial freedom.

This is basically what I did on my way to reaching financial freedom and retiring in my early 30s.

You can read all about that in my Early Retirement Blueprint.

The FIRE Fund – my real-money portfolio – now generates enough five-figure passive dividend income for me to comfortably live off of.

As effective as the dividend growth investing strategy can be, much of that effectiveness comes down to meticulousness around valuation at the time of making any investment.

That’s because price only tells you what you pay, but value tells you what you get.

An undervalued dividend growth stock should provide a higher yield, greater long-term total return potential, and reduced risk.

This is relative to what the same stock might otherwise provide if it were fairly valued or overvalued.

Price and yield are inversely correlated. All else equal, a lower price will result in a higher yield.

That higher yield correlates to greater long-term total return potential.

This is because total return is simply the total income earned from an investment – capital gain plus investment income – over a period of time.

Prospective investment income is boosted by the higher yield.

But capital gain is also given a possible boost via the “upside” between a lower price paid and higher estimated intrinsic value.

And that’s on top of whatever capital gain would ordinarily come about as a quality company naturally becomes worth more over time.

These dynamics should reduce risk.

Undervaluation introduces a margin of safety.

This is a “buffer” that protects the investor against unforeseen issues that could detrimentally lessen a company’s fair value.

It’s protection against the possible downside.

Financial freedom is actually attainable for the average person these days – unlike most of recorded human history – and buying undervalued high-quality dividend growth stocks might just be the very best way to attain it.

Now, being able to tell whether or not something appears to be undervalued first requires an understanding of what valuation is and how the valuation process works.

This is where Lesson 11: Valuation comes in.

Written by fellow contributor Dave Van Knapp, it’s a super helpful primer to the world of valuation, even providing an easy-to-use valuation template you can apply on your own.

With all of this in mind, let’s take a look at a high-quality dividend growth stock that appears to be undervalued right now…

Marsh Inc. (MRSH)

Marsh Inc. (MRSH) is an American professional services firm which operates globally.

Founded in 1871, Marsh, which used to be known as Marsh & McLennan before its early 2026 rebranding, is now an $87 billion (by market cap) major solutions provider which employs almost 100,000 people.

Marsh has clients in 130 countries.

The company operates across two segments: Risk & Insurance Services, 64% of FY 2025 operating revenue; and Consulting, 36%.

Its main segment, Risk & Insurance Services, is anchored by the company’s position as the world’s largest insurance broker.

This is Marsh’s crown jewel, featuring “tollbooth” characteristics.

An insurance broker is an intermediary between clients (such as individuals or even businesses) and insurance companies, and this intermediary status takes on none of the direct financial risk associated with insurance.

The brokerage maintains “sticky” customers and feeds off of recurring insurance transactions (taking a percentage of insurance premiums via a commission charge).

This fee-based business has highly visible and recurring revenue, and it sports extremely high returns on capital and margins.

To say that it’s excellent is understating it.

On the other hand, the other business under the Marsh umbrella is no slouch.

The consultancy side of the house is a capital-light, asset-light business model with loyal clientele of its own, and it has the ability to scale and generate higher revenue with little incremental increases in costs.

Similarly to insurance, its consultancy work has a lot to do with risk management for its clients (and insurance, as we already know, is all about risk management).

This “one-two punch” across different elements of risk management has led to a success story more than 150 years into the making.

Yet, recent results suggest its best days may be yet ahead, signaling even more revenue, profit, and dividend growth to come.

Dividend Growth, Growth Rate, Payout Ratio and Yield

Already, Marsh has increased its dividend for 16 consecutive years.

Its 10-year dividend growth rate is 11.3%, which is impressive, but what might be even more impressive is the relentless nature of it.

In pretty much every year, Marsh increases its dividend by somewhere between 10% and 12%.

It’s remarkable.

Meantime, the stock offers a yield of 2%.

Not the highest yield out there, sure, but a solid starting yield when you’re layering double-digit dividend growth on top of it.

Oftentimes, double-digit dividend growth comes with a larger sacrifice around yield.

By the way, this yield is 60 basis points higher than its own five-year average, so that sacrifice is currently even less than it usually is.

With a payout ratio of 42.7%, there’s plenty of headroom for dividend raises ahead.

Combining the low payout ratio with the business’s growth profile (which I’ll touch on soon) paints a picture of continued strong dividend growth.

If one isn’t in dire need for yield/income today, Marsh’s ability to compound over time should appeal to those with the delayed gratification gene and a long investment runway in front of them.

Revenue and Earnings Growth

As appealing as it may be, though, much of that is predicated on prior information.

However, investors must always have subsequent information at top of mind, as the capital of today gets risked for the rewards of tomorrow.

As such, I’ll now build out a forward-looking growth trajectory for the business, which will come in handy when the time comes to estimate intrinsic value.

I’ll first show you what the business has done over the last decade in terms of its top-line and bottom-line growth.

And I’ll then reveal a professional prognostication for near-term profit growth.

Amalgamating the proven past with a future forecast in this manner should give us the ability to roughly gauge where the business could be going from here.

Marsh moved its revenue from $13.2 billion in FY 2016 to $27 billion in FY 2025.

That’s a compound annual growth rate of 8.3%.

Solid.

I usually look for mid-single-digit (or better) top-line growth out of a mature firm like this, and Marsh is more than making good on that.

Notably, Marsh frequently acquires smaller businesses in tuck-in moves designed to incrementally grow the business and bolster its capabilities, so this has an effect on top-line growth.

Meanwhile, earnings per share rose from $3.38 to $8.43 over this period, which is a CAGR of 10.7%.

An excellent result, especially considering how persistent it’s been, and this helps to explain how Marsh has been able to afford double-digit dividend raises like clockwork.

Simply put, the business itself is showing double-digit, clockwork-like growth.

Excess bottom-line growth was aided by accretive acquisitions, margin expansion, and buybacks.

Regarding that last point, the outstanding share count has been reduced by about 6% over the last decade in a steady, methodical way.

And quickly circling back around to acquisitions, the excess bottom-line growth indicates accretion and prudent capital allocation by management.

Looking forward, CFRA is calling for an 8% CAGR for Marsh’s EPS over the next three years.

While this would be below where the last decade came in at, it would still be an admirable rate of bottom-line growth.

There are many companies out there that would love to sport an 8% growth rate.

CFRA cites Marsh’s leading market share position, diversified businesses, and global scale as key points of optimism.

The core value proposition around risk and strategy within the broker business remain as strong as ever, but CFRA does flag some concern around the consultancy side of the company and mixed demand there.

I see a case where the consultancy may start to see pressure at the margins from AI.

Nonetheless, CFRA’s forecast, builds in quite a bit of erosion via the 20% slowdown in EPS growth.

That high-single-digit bottom-line growth rate easily clears the way for like-or-better dividend growth.

Combining HSD bottom-line growth with a slight, gradual expansion in the payout ratio positions Marsh to continue handing out those generous dividend raises in the 10% area.

It looks like continued consistency to me, and that’s a great thing.

Financial Position

Moving over to the balance sheet, Marsh has a good financial position.

The long-term debt/equity ratio is 1.2, while the interest coverage ratio is approximately 7.

The acquisitive nature of Marsh helps to explain the modest balance sheet weakness.

Net debt of about $15 billion is relatively immaterial for a company of this size, so I’m not overly concerned about the balance sheet, but any improvement on this front would be appreciated.

Profitability is robust.

Return on equity has averaged 30.8% over the last five years, while net margin has averaged 15.3%.

Excellent numbers here.

Although the balance sheet structure aids ROE, even ROIC is often in a mid-teens area.

Marsh is routinely generating high returns on capital – a key characteristic of a high-quality company.

Other than the balance sheet, which is a small chink in the armor, this is fundamentally a great business.

And with economies of scale, barriers to entry, “sticky” customers, and brand recognition in the industry, the company does benefit from durable competitive advantages.

Of course, there are risks to consider.

Litigation, regulation, and competition are omnipresent risks in every industry.

In particular, both insurance and consulting are extremely competitive, although Marsh’s scale and brand power help to mitigate some of the competitive pressures.

The insurance industry is mature, limiting the company’s growth potential in its largest and most profitable segment.

Some of Marsh’s growth is reliant on price increases across insurance, which is not within the company’s control.

Being a global enterprise, Marsh has exposure to geopolitics and currency exchange rates.

The law of large numbers may start to be a headwind, as it’s already the largest firm in its industry.

AI could soon start to pressure the consultancy side of the company, especially at the margins.

There are some risks to be aware of, but this is true for every business.

However, with the stock taking a 25% haircut from recent highs, the valuation seems to already build in a lot of risk…

Valuation

The P/E ratio is now sitting at 21.5.

That’s not shockingly low in isolation, but it’s well off of its own five-year average 27.

The P/CF ratio, at 15.1, is not high at all, and it’s also well below its own five-year average of 19.2.

And the yield, as noted earlier, is significantly higher than its own recent historical average.

So the stock looks cheap when looking at basic valuation metrics. But how cheap might it be? What would a rational estimate of intrinsic value look like?

I valued shares using a dividend discount model analysis.

I factored in a 10% discount rate and a long-term dividend growth rate of 8%.

This seems like a very reasonable expectation to have out of Marsh.

After all, this company has delivered low-double-digit dividend growth like clockwork for more than a decade.

And the payout ratio is low enough to allow for dividend growth to actually outpace business growth for quite a while.

With the near-term forecast for EPS growth also at this 8% mark, it seems unlikely to me that Marsh will not be able to keep up with this assumption.

The DDM analysis gives me a fair value of $194.40.

The reason I use a dividend discount model analysis is because a business is ultimately equal to the sum of all the future cash flow it can provide.

The DDM analysis is a tailored version of the discounted cash flow model analysis, as it simply substitutes dividends and dividend growth for cash flow and growth.

It then discounts those future dividends back to the present day, to account for the time value of money since a dollar tomorrow is not worth the same amount as a dollar today.

I find it to be a fairly accurate way to value dividend growth stocks.

This stock looks like it went from too expensive to too cheap in the midst of that 25% drop, which is a classic example of Mr. Market’s mood swings from overly optimistic to overly pessimistic.

But we’ll now compare that valuation with where two professional stock analysis firms have come out at.

This adds balance, depth, and perspective to our conclusion.

Morningstar, a leading and well-respected stock analysis firm, rates stocks on a 5-star system.

1 star would mean a stock is substantially overvalued; 5 stars would mean a stock is substantially undervalued. 3 stars would indicate roughly fair value.

Morningstar rates MRSH as a 4-star stock, with a fair value estimate of $197.00.

CFRA is another professional analysis firm, and I like to compare my valuation opinion to theirs to see if I’m out of line.

They similarly rate stocks on a 1-5 star scale, with 1 star meaning a stock is a strong sell and 5 stars meaning a stock is a strong buy. 3 stars is a hold.

CFRA rates MRSH as a 3-star “HOLD”, with a 12-month target price of $208.00.

We’re all in a fairly tight range here. Averaging the three numbers out gives us a final valuation of $199.80, which would indicate the stock is possibly 9% undervalued.

Bottom line: Marsh Inc. (MRSH) is a high-quality company with two big levers to pull and ways to win. It has consistently shown operational excellence at almost every level. With a market-beating yield, double-digit dividend growth, a low payout ratio, more than 15 consecutive years of dividend increases, and the potential that shares are 9% undervalued, this name offers a nice blend of quality, growth, value, and yield for long-term dividend growth investors.

-Jason Fieber

Note from D&I: How safe is MRSH’s dividend? We ran the stock through Simply Safe Dividends, and as we go to press, its Dividend Safety Score is 80. Dividend Safety Scores range from 0 to 100. A score of 50 is average, 75 or higher is excellent, and 25 or lower is weak. With this in mind, MRSH’s dividend appears Safe with an unlikely risk of being cut. Learn more about Dividend Safety Scores here.

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.

Source: Dividends & Income

Disclosure: I’m long MRSH.