For the Dividend Growth Folks

Hi all,

In for a penny . . .

Thought I might as well do something similar for dividend growth as I just did for High Yield.

The selection process began with my Universe of followed dividend stocks ordered in increasing payback (a measure that attempts to account for both yield and dividend growth, not one or the other, but both). Then those tickers not satisfying the criteria, below, were deleted. The top 17 resulting names made the list.

This time the primary criteria was that both the most recent increase (MRI) and the 5-year CAGR for the dividend had to be at least 7%.

Also, the interest coverage ratio had to be 7 or higher, except for Utilities where the requirement was 4. Given that higher interest rates, for longer, is a likely scenario for the future, this could be a much more important consideration going forward than it has been in the past. For certain financial related firms this metric is meaningless. So, instead I picked the stronger business based on just my opinion.

Another criteria was the dividend growth streak. I set a minimum of 8 years.

A current yield of 3% or greater was highly desired but there were several high quality (based on above) names that were just under that and I did not rule these names out simply because they were under 3% by a few 10’s of basis points on the current yield. We are coming up on dividend-increase season and the actual earned yield after a quarter, or two, will likely be over 3% on the price paid soon anyway.

I made an effort to go with well known, household names.

Also, I wanted to have all sectors represented. But, there are no “Energy”, “Basic Materials” or “Communication Services” stocks in my database that satisfy all the criteria (primarily the dividend growth rate). Also, there are no “Real Estate” stocks in my Universe, intentionally. So those sectors are absent. I think the end result is still fairly well diversified nonetheless.

Here’s what I came up with:

Current Most
Annual Current Recent Dividend Interest Payout Years
Ticker Company DPS Quote Yield Increase 5 Yr. CAGR Coverage Ratio Growth Sector
WHR Whirlpool Corporation $7.00 $134.81 5.19% 25.0% 9.7% 11.8 26% 11 Years Consumer Cyclical
TGT Target $4.32 $148.39 2.91% 20.0% 11.7% 13.5 41% 53 Years Consumer Defensive
MDLZ Mondelez International Inc. $1.54 $54.83 2.81% 10.0% 11.8% 14.2 48% 8 Years Consumer Defensive
FITB Fifth Third Bank $1.32 $31.96 4.13% 10.0% 15.6% NM 37% 11 Years Financial Services
BLK BlackRock Inc. $19.52 $550.28 3.55% 18.2% 14.3% 36.1 47% 12 Years Financial Services
AFL AFLAC Inc. $1.60 $56.20 2.85% 21.2% 13.2% 24.5 25% 39 Years Financial Services
AMGN Amgen Inc. $7.76 $225.40 3.44% 10.2% 11.0% 7.9 41% 10 Years Healthcare
ABBV AbbVie Inc. $5.64 $134.21 4.20% 8.5% 17.1% 8.3 42% 8 Years Healthcare
UPS United Parcel Service Inc. $6.08 $161.54 3.76% 49.0% 12.9% 19.6 40% 12 Years Industrials
SNA Snap-on Inc. $5.68 $201.35 2.82% 15.4% 14.9% 25.2 34% 12 Years Industrials
FAST Fastenal Company $1.24 $46.04 2.69% 10.7% 14.1% 140.3 66% 23 Years Industrials
WSO Watsco Inc. $8.80 $257.46 3.42% 12.8% 15.9% 361.4 60% 8 Years Industrials
HPQ HP Inc. $1.00 $24.92 4.01% 29.0% 13.5% 19.5 23% 11 Years Technology
AVGO Broadcom $16.40 $444.01 3.69% 13.9% 32.1% 7.3 47% 10 Years Technology
TXN Texas Instruments $4.96 $154.78 3.20% 7.8% 14.9% 52.7 48% 16 Years Technology
NJR New Jersey Resources $1.56 $38.70 4.03% 7.6% 7.4% 4.1 70% 26 Years Utilities
WEC WEC Energy Group Inc. $2.91 $89.43 3.25% 7.4% 6.9% 4.1 65% 18 Years Utilities

Here’s the # of shares owned and the price paid:

Price Invested Annual
Ticker Shares Paid Amount Dividend
ABBV 75 $134.21 $10,066 $423
AFL 178 $56.20 $10,004 $285
AMGN 44 $225.40 $9,918 $341
AVGO 23 $444.01 $10,212 $377
BLK 18 $550.28 $9,905 $351
FAST 217 $46.04 $9,991 $269
FITB 313 $31.96 $10,003 $413
HPQ 401 $24.92 $9,993 $401
MDLZ 182 $54.83 $9,979 $280
NJR 258 $38.70 $9,985 $402
SNA 50 $201.35 $10,068 $284
TGT 67 $148.39 $9,942 $289
TXN 65 $154.78 $10,061 $322
UPS 62 $161.54 $10,015 $377
WEC 112 $89.43 $10,016 $326
WHR 74 $134.81 $9,976 $518
WSO 39 $257.46 $10,041 $343
Total $170,174 $6,004
Portfolio Yield = 3.53%

The port’s yield is still well over 3%. And, my expectation would be that the dividends received will grow significantly faster than the High Yield port and faster than inflation provided inflation moderates some in the not to distant future.

Rich

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Hi all,

Checking in on the hypothetical Dividend Growth port:

Dividend Annual Current Value Value
Price Invested When Dividend Current Current Annual Current Change Change
Ticker Shares Paid Amount Purchased Purchased Quote Dividend Dividend Value Dollars %
ABBV 75 $134.21 $10,066 $5.64 $423 $145.28 $5.92 $444.00 $10,896 $830 8.2%
AFL 178 $56.20 $10,004 $1.60 $285 $67.18 $1.60 $284.80 $11,958 $1,954 19.5%
AMGN 44 $225.40 $9,918 $7.76 $341 $269.04 $7.76 $341.44 $11,838 $1,920 19.4%
AVGO 23 $444.01 $10,212 $16.40 $377 $465.30 $16.40 $377.20 $10,702 $490 4.8%
BLK 18 $550.28 $9,905 $19.52 $351 $656.15 $19.52 $351.36 $11,811 $1,906 19.2%
FAST 217 $46.04 $9,991 $1.24 $269 $49.49 $1.24 $269.08 $10,739 $749 7.5%
FITB 313 $31.96 $10,003 $1.32 $413 $35.13 $1.32 $413.16 $10,996 $992 9.9%
HPQ 401 $24.92 $9,993 $1.00 $401 $28.29 $1.00 $401.00 $11,344 $1,351 13.5%
MDLZ 182 $54.83 $9,979 $1.54 $280 $63.22 $1.54 $280.28 $11,506 $1,527 15.3%
NJR 258 $38.70 $9,985 $1.56 $402 $44.28 $1.56 $402.48 $11,424 $1,440 14.4%
SNA 50 $201.35 $10,068 $5.68 $284 $229.14 $6.48 $324.00 $11,457 $1,390 13.8%
TGT 67 $148.39 $9,942 $4.32 $289 $159.63 $4.32 $289.44 $10,695 $753 7.6%
TXN 65 $154.78 $10,061 $4.96 $322 $162.65 $4.96 $322.40 $10,572 $512 5.1%
UPS 62 $161.54 $10,015 $6.08 $377 $165.69 $6.08 $376.96 $10,273 $257 2.6%
WEC 112 $89.43 $10,016 $2.91 $326 $91.39 $2.91 $325.92 $10,236 $220 2.2%
WHR 74 $134.81 $9,976 $7.00 $518 $133.33 $7.00 $518.00 $9,866 $(110) -1.1%
WSO 39 $257.46 $10,041 $8.80 $343 $261.96 $8.80 $343.20 $10,216 $176 1.7%
Total $170,174 $6,004 $6,065 $186,530 $16,356 9.6%
Portfolio Yield = 3.53% 3.25%

Two holdings have increased their dividend, ABBV and SNA. The annual dividend is now $6,065 compared to $6,004 originally.

The portfolio value has increased $16,356 or 9.6% over the last month. (S&P 500 is slightly negative).

Rich

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Thank you for this. It’s starting to get interesting out here in investing land, your list is helpful.

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