As you know already, I’m currently in the process of selling my house… as well as everything else. In fact, my deepest wish is to have sold 80% of what I own before June 2016 and leave with my family on a one year RV trip across North & Central America. While planning this huge trip, I’m also planning to invest part of the proceeds of my house in the stock market.
This is why I created this list of 10 very strong dividend growth stocks that I can buy and sleep like a rock. I didn’t want to make an exhaustive list as there are many great companies to buy. I didn’t want to make a classic list either, this is why I tried to avoid classics such as Coca-Cola (KO) in this list… but I couldn’t help putting Johnson & Johnson (JNJ) hahaha!
This article includes the list with a brief introduction as to why I like each company. However, you can download the complete analysis report for free. This is a 39 pages report displaying dividend growth metrics, my own analysis along with my current stock valuation. Simply go to the top of this article and complete the form with your name and email address to subscribe to my free newsletter. If you are already registered, you will receive the report this Monday.
How the list was built
You will probably wrinkle your forehead for some of my picks but that was the point: going off the beaten path. I didn’t go out into left field either, but I wanted to select companies with strong economic moats and almost impossible to replicate competitive advantages. Each pick respects my 7 dividend investing principles and are or will be part of my personal portfolio at one point in time. They are also part of my Dividend Stocks Rock portfolios.
I’ve considered the timing in the market as all of them represent a buying opportunity during the fall of 2015. I didn’t consider the sectors and I’m not claiming this list should constitute a portfolio by itself. However, I’m pretty convinced these are strong contenders to be part of any dividend growth portfolio.
The focus has been on dividend growth, not dividend yield. Some companies show very low yield (under 2%) while only one is paying over 4%. However, most of them are in the range of 3%, which is more than respectable considering their strong potential for payment increases in the upcoming years. So here’s my list of top dividend growth stocks:
10 Dividend Growth Stocks for a Rock Solid Portfolio
For each company, I’ve made a quick list of three reasons why you should consider them for your portfolio. However, the report includes a full analysis of each company.
3M Co (MMM) Dividend yield: 2.91%
MMM’s revenue trend is very strong. Since 2012, revenue hasn’t increase at the same pace mainly because the company faces currency headwinds.
MMM has been paying dividends for the past 98 years and is nearly doubling its dividend payment every 7 years.
Roughly 50% of its products are consumable, which implies a very high rate of repeat business year after year.
Walt Disney (DIS) Dividend yield: 1.30%
DIS has a strong ability to create/innovate new characters (Frozen is its latest success).
The dividend payment grew aggressively over the past 5 years, but is still very low, opening the gate for additional growth.
Stronger US economy leads to better parks & resorts performance.
Genuine Parts (GPC) Dividend yield: 3.04%
GPC has increased its dividend payout for 58 consecutive years and has 37,500 employees across 2,600 operating sites.
GPC is present in all kinds of industries from food and beverage to forest as well as healthcare industries.
GPC has acquired smaller players in the industrial parts industry to boost their sales in the upcoming years.
Johnson & Johnson (JNJ) Dividend yield: 3.23%
JNJ shows 52 consecutive years of dividend increases.
JNJ also has 31 years of EPS increases.
JNJ has 24 strong brands where 70% of them are #1 or #2 in sales in their market.
BlackRock (BLK) Dividend yield: 2.94%
BLK impresses with better profitability than its peers.
BLK now shows $4.774 trillion in assets under management. This means lots of management fees to be earned for the company.
Lately, there are rumors of BLK expanding their business in India. This could lead to additional growth for this ETF giant.
Apple (AAPL) Dividend yield: 1.91%
AAPL’s strongest asset is definitely its brand. Apple’s brand is known around the world.
AAPL has a diversified product ecosystem. Buying an Apple product makes you want to buy another one and build your ecosystem at home. The integration is easy to do and will turn the company into a “stable” business.
AAPL has plenty of room to continue its growth since the payout ratio is around 25%.
Lockheed Martin (LMT) Dividend yield: 3.24%
LMT stock is up 123% over the past 5 years, excluding a juicy dividend as the company increased its dividend by 18% annually during the last 5 years.
LMT is the leader in the defense industry and while US Gov’t may cut their defense budget, LMT will continue to be a very important provider.
LMT revenues will have to increase again, but payout ratio is still under control.
Chevron (CVX) Dividend yield: 5.38%
CVX has achieved a 5-year dividend growth near double digits.
CVX is part of the prestigious dividend aristocrats list.
CVX is entering the “worry zone” as the dividend yield is around 5%. Companies with yield higher than 5% are usually bound to higher risks or very limited growth in the future, but the dividend payment is not at risk for the moment.
Hasbro (HAS) Dividend yield: 2.62%
New deal for Frozen proves Hasbro can steal business from Mattel and take over bigger projects.
Upcoming blockbusters such as Frozen 2 and Star Wars will generate more toy sales for Hasbro.
HAS has the unique ability to renew and manage its franchise brands. In 2014, its franchise brand sales grew by 31%.
Wells Fargo (WFC) Dividend yield: 2.99%
Wells Fargo’s earnings will rise with interest rate increases and an improving housing market.
WFC’s diversified business model insures dividend growth sustainability over the long haul.
WFC shows 21 consecutive years (1988 to 2009) of dividend increases. WFC quickly grew back the dividend payout.
This completes the list for US stocks. You can download my complete report on those top 10 dividend growth stocks by subscribing to my free newsletter below.
I’m currently working a similar list for the Canadian market too. If you have any questions with regards to the list, let me know!
Disclaimer: I personally own shares of DIS, JNJ, AAPL, LMT. All others are part of my Dividend Stocks Rock Portfolios.
I’d love to see a similar list for Canada. Please let me know when you get that one done.
Thanks for the good work
Keith