Use access key #2 to skip to page content.

Dividends4Life (26.97)

8 Stocks With Strong Dividend Growth Metrics

Recs

5

October 31, 2012 – Comments (0) | RELATED TICKERS: WAG , JCI , IBM

When evaluating a company as a potential income investment I look at its calculated fair value, ability to generate cash, debt position and the net present value of its dividend stream (NPV MMA Differential) compared to alternative "safe" investments. In earlier articles, we have looked at each of these in depth.

In addition, I look at four other metrics that individually may not be as important as the above, but collectively provide great insight into the potential success of a stock as a dividend investment. Here are the four other key metrics that I look at when evaluating a dividend stock:

I. Dividend Growth Rate:
The dividend growth rate is a key metric in many calculations. As such, I use a conservative estimate as follows: The minimum dividend growth rate of the 1, 3, 5, 7, 10 year compound annual growth rate or 15%, if dividends grew on average in excess of 15% for each consecutive 4 year periods, within the last 10 years of history. You can see how this is calculated in my D4L-PreScreen.xls model. This metric is True if the dividend growth rate is 15% or above.

II. Years of Div. Growth:
Years of consecutive dividend growth.  This metric is True for 15 or more years.

III. Rolling 4-yr Div. > 15%:
Dividends will double every 5 years if they grow by 15%. This test is True if dividends grew on average in excess of 15% for each consecutive 4 year periods, within the last 10 years of history.


IV. Years to >MMA:
The number of years until dividend earnings exceed the earnings from a hypothetical money market account earning an average 20 year Money Market Account rate. This rate is validated by looking at a 20 year Treasury rate. This metric is True if the number of years is less than 5.

When taken considered together, these are tough metrics. Of the 226 stocks that I currently follow, only 8 had all the above metrics true. They were:

Church & Dwight Co. Inc. (CHD)
Church & Dwight Co. Inc. is a manufacturer and marketer of a broad range of household, personal care and specialty products under various brands such as Arm & Hammer, Oxiclean, Orajel, Trojan and Spinbrush sells its products in the U.S. and certain foreign countries.
- Yield: 1.8%
- Dividend Growth Rate: 20.0%
- Years of Div. Growth: 16
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 2

Expeditors International (EXPD)
Expeditors International of Washington Inc. is a global air and ocean freight forwarder and customs broker.
- Yield: 1.6%
- Dividend Growth Rate: 15.0%
- Years of Div. Growth: 18
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 4

International Business Machines Corp. (IBM)
IBM's global capabilities include information technology services, software, computer hardware equipment, fundamental research, and related financing.
- Yield: 1.8%
- Dividend Growth Rate: 15.0%
- Years of Div. Growth: 17
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 4

W.W. Grainger, Inc. (GWW)
Grainger Inc. is the largest global distributor of industrial and commercial supplies, such as hand tools, electric motors, light bulbs and janitorial items.
- Yield: 1.6%
- Dividend Growth Rate: 16.5%
- Years of Div. Growth: 41
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 4

Stryker Corporation (SYK)
Stryker Corp. makes specialty surgical and medical products such as orthopedic implants, endoscopic items and hospital beds.
- Yield: 1.6%
- Dividend Growth Rate: 18.3%
- Years of Div. Growth: 19
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 3

Lowe's Companies, Inc. (LOW)
Lowe's Companies, Inc. sells retail building materials and supplies, lumber, hardware and appliances through more than 1,700 stores in the U.S. and Canada.
- Yield: 2.0%
- Dividend Growth Rate: 17.0%
- Years of Div. Growth: 50
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 2

Johnson Controls, Inc. (JCI)
Johnson Controls Inc. supplies building controls and energy management systems, automotive seating, and batteries.
- Yield: 2.7%
- Dividend Growth Rate: 15.0%
- Years of Div. Growth: 20
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 0

Walgreen Co. (WAG)
Walgreen Co. is the largest U.S. retail drug chain in terms of revenues, this company operates more than 8,000 drug stores throughout the U.S. and Puerto Rico.
- Yield: 3.1%
- Dividend Growth Rate: 20.0%
- Years of Div. Growth: 37
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 0

These metrics focus on compound dividend growth, which is highly important for the successful investor in dividend growth stocks. In my dividend analysis worksheet, a company will earn a Star for its other metrics if two of the above metrics are True.

Full Disclosure: No position in the aforementioned securities. See a list of all my dividend growth holdings here.
 
Related Articles
- 7 Higher-Yielding Consumer Stocks To Build Your Yield
- 2 High-Yield Investments To Increase Income While Waiting On Dividend Growth
- 6 Healthcare Dividend Stocks For A Healthy Portfolio
- 11 Low-Debt, Higher-Yielding Dividend Stocks
- 7 Small-Cap, High-Yield Dividend Stocks

0 Comments – Post Your Own

Featured Broker Partners


Advertisement