I skate to where the puck is going to be, not where it has been."
- Wayne Gretzky
It can be applied to so many things in life, including investing in Dividend Growth Stocks. Just as Gretzky has a vision as to where the puck is going, investors need to have a similar vision, and not get caught up on short-sighted distractions.
Investing in dividend growth stocks requires a long-term vision. It is easy to run a screen and find stocks that are paying a 10%, 15% or 20% yield today; but how long will they be able to sustain it? Instead you may want to skate to where the future high-yielders are going to be. To do that end, here are some things you need to know...
Tracking Yield On Cost
Yield-on-cost (YOC) is simply Current Annual Dividend divided by Original Cost Per Share. YOC not a substitute for calculating an internal rate of return (IRR). The IRR calculation takes into account both capital appreciation and the timing of cash flows (purchases, sells and dividends).However, as a dividend growth investor, my primary focus is on dividend growth and since my desired holding period is forever, capital appreciation is little more than an interesting side note.
YOC is much better suited for tracking dividend growth since it is individually tied to a stock and takes into account all the variations of growth rates over time, along with the timing of purchases. Also, it is useful when trying to explain to our income investor brethren why we chose the stock yielding 3% over 'Amalgamated Risk' at 8%.
This week week, I screened my dividend growth stocks database for stocks that have a dividend growth rate in excess of 5% that will be yielding between 20% to 30% in 20 years based on their current yield and dividend growth rate. The results are presented below:
Casey's General Stores Inc. (CASY) has over 1,650 convenience stores in the Midwest, selling food, beverage, health and automotive products. CASY is a member of the Broad Dividend Achievers™ Index.
Yield: 1.1% | Dividend Growth: 15.8% | 20 Year Yield: 20.9%
Grainger Inc. (GWW) is the largest global distributor of industrial and commercial supplies, such as hand tools, electric motors, light bulbs and janitorial items. GWW is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion.
Yield: 1.3% | Dividend Growth: 15.0% | 20 Year Yield: 20.6%
IBM (IBM) global capabilities include information technology services, software, computer hardware equipment, fundamental research, and related financing. IBM is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.
Yield: 1.5% | Dividend Growth: 16.0% | 20 Year Yield: 29.3%
John Wiley & Sons (JW-A) is a global publisher of print and electronic products, providing content and digital solutions to customers worldwide. The company has paid a cash dividend to shareholders every year since 2001 and has increased its dividend payments for 18 consecutive years.
Yield: 1.8% | Dividend Growth: 13.6% | 20 Year Yield: 22.7%
Murphy Oil Corp. (MUR) is an international integrated oil company has exploration and production interests worldwide, as well as refining and marketing operations in the U.S., which it plans to divest. MUR is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.
Yield: 1.8% | Dividend Growth: 15.0% | 20 Year Yield: 29.8%
United Technologies Corp.'s (UTX) portfolio includes Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators, and Carrier air conditioners, among other products. UTX is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.
Yield: 2.3% | Dividend Growth: 11.7% | 20 Year Yield: 20.9%
Wal-Mart Stores, Inc. (WMT) is the largest retailer in North America,Wal-Mart operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets. WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion.
Yield: 2.4% | Dividend Growth: 13.3% | 20 Year Yield: 28.9%
Colgate-Palmolive Company (CL) is a major consumer products company that markets oral, personal and household care and pet nutrition products in more than 200 countries and territories. CL is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion.
Yield: 2.5% | Dividend Growth: 11.8% | 20 Year Yield: 23.3%
General Dynamics (GD) is the world's fifth largest military contractor and also one of the world's biggest makers of corporate jets. GD is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.
Yield: 2.6% | Dividend Growth: 10.8% | 20 Year Yield: 20.3%
The Clorox Company (CLX) is a diversified producer of household cleaning, grocery and specialty food products is also a leading producer of natural personal care products. CLX is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion.
Yield: 3.5% | Dividend Growth: 9.1% | 20 Year Yield: 20.2%
Meredith Corp. (MDP) derives its earnings mainly from magazine publishing (primarily Better Homes and Gardens and Ladies' Home Journal) and ownership of 12 TV stations. MDP is a member of the S&P 500 a member of the Broad Dividend Achievers™ Index.
Yield: 3.8% | Dividend Growth: 10.9% | 20 Year Yield: 29.7%
Avista Corp. (AVA) generates, transmits and distributes energy as well as engages in energy-related businesses. The company operates in two business segments. The company has paid a cash dividend to shareholders every year since 1899 and has increased its dividend payments for 9 consecutive years.
Yield: 4.3% | Dividend Growth: 8.8% | 20 Year Yield: 23.1%
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 200+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long UTX, WMT, CL, GD, CLX in my Dividend Growth Portfolio and AVA and MDP in my High-Yield portfolio. See a list of all my dividend growth holdings here.
Related Posts
- Why We Are Dividend Growth Investors
- What Determines A Dividend Stock's Yield
- Managing Risk With Dividend Stocks
- 9 Stocks With a Sustainable Dividend
- 11 Low Beta, High Quality Dividend Stocks
(Photo Credit)
Tags: [CASY] [GWW] [IBM] [JW-A] [MUR] [UTX] [WMT] [CL] [GD] [CLX] [MDP] [AVA]