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