My monthly 7 Dividend Growth Stocks series present seven high-quality dividend growth stocks for further analysis and possible investment.
I apply different screens every month to narrow down my watch list of more than 700 dividend growth stocks, . Changing the screens from month to month highlights various aspects of dividend growth [DG] investing. For example, income investors prefer higher-yielding stocks, growth-oriented investors favor higher DG rates, and value investors look for deep discounts.(C#’s) that indicate some likelihood of delivering annualized returns of 8% or higher.
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In case you missed previous articles in this series, here are links to them:
- 7 Dividend Growth Stocks For December 2021
- 7 Dividend Growth Stocks For November 2021
- 7 Dividend Growth Stocks For October 2021
- 7 Dividend Growth Stocks For September 2021
- 7 Dividend Growth Stocks For August 2021
- 7 Dividend Growth Stocks For July 2021
About the Chowder Rule
The Chowder Number (C#) is a popular growth-oriented metric for screening DG stocks for possible investment. Named for Seeking Alpha author Chowder, the metric favors DG stocks likely to produce annualized returns of at least 8%.
To obtain the C#, you sum a stock’s forward dividend yield and five-year annual dividend growth rate., , and Portfolio Insight. I also using each stock’s five-year average dividend yield. With up to eleven estimates and targets available, I ignore the outliers (the lowest and highest values) and use the average of the median and mean of the remaining values as my FV estimate.
The latest (dated December 14, 2022) contains 709 stocks. Of these, 158 are Investment Grade, 166 yields at least 3%, and 315 are discounted. Furthermore, 477 are likely or somewhat likely to deliver annualized returns of at least 8%. Only 35 stocks pass all four screens.'
7 Top-Ranked Dividend Growth Stocks for January
Here are top-ranked dividend growth stocks that passed this month’s screens:
I own all of these stocks in my DivGro portfolio.
Below, I provide a table with key metrics of interest to dividend growth investors:
- Yrs: years of consecutive dividend increases
- Qual: quality score
- Fwd Yield: forward dividend yield for a recent share Price
- 5-Avg Yield: 5-year average dividend yield
- 5-DGR: 5-year compound annual growth rate of the dividend
- 5-YOC: the projected yield on cost after five years of investment
- C#: , a popular metric for screening dividend growth stocks
- 5-TTR: 5-year compound trailing total returns
- VL Safety Rank: 's
- VL Fin Stren: Value Line's ratings
- MS Econ Moat: 's
- S&P Cred Rating: 's
- SSD Divi Safety: '
- Buy Below: my risk-adjusted buy below price
- –Disc +Prem: discount or premium of the recent share Price to my Buy Below price
- Price: recent share price
My risk-adjusted Buy Below prices allow premium valuations for the highest-quality stocks but require discounted valuations for lower-quality stocks.
The Fwd Yield column is colored green if Fwd Yield ≥ 5-Avg Yield.
Next, let's look at each stock in turn. All data and charts are courtesy of .
Merck & Co, Inc (MRK)
Founded in 1891 and headquartered in Kenilworth, New Jersey, MRK is a global health care company that offers health solutions through prescription medicines, vaccines, biologic therapies, and animal health products. MRK markets its products to drug wholesalers and retailers, hospitals, government entities and agencies, physicians, physician distributors, veterinarians, distributors, animal producers, and managed health care providers.
Lockheed Martin Corporation (LMT)
Founded in 1909 and headquartered in Bethesda, Maryland, LMT is a global security and aerospace company engaged in researching, designing, developing, manufacturing, integrating, and sustaining advanced technology systems. LMT operates through four segments, Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space Systems.
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceuticals worldwide. Its pharmaceutical products include tablets or capsules. It also uses biologics to produce products administered through injections or by infusion. BMY was founded in 1887.
3M Company (MMM)
MMM is a diversified technology company with worldwide operations. The company has leading positions in consumer and office; display and graphics; electronics and telecommunications; health care; industrial; safety, security and protection services; transportation; and other businesses. MMM was founded in 1902 and is headquartered in St. Paul, Minnesota.
Amgen Inc. (AMGN)
Based in Thousand Oaks, California, AMGN is a biotechnology company. The company discovers, develops, manufactures, and delivers human therapeutics worldwide. It offers products for the treatment of severe illnesses in oncology/hematology, cardiovascular disease, inflammation, bone health, nephrology, and neuroscience. AMGN was founded in 1980.
Pinnacle West Capital Corporation (PNW)
PNW is a holding company that provides retail and wholesale electric services primarily in Arizona. Its subsidiary, Arizona Public Service Company, is a vertically integrated electric company that generates, transmits, and distributes electricity using coal, nuclear, gas, oil, and solar resources. PNW was founded in 1920 and is headquartered in Phoenix, Arizona.
Gilead Sciences, Inc. (GILD)
GILD is a research-based biopharmaceutical company that discovers, develops, and commercializes innovative medicines. The company’s primary focus areas include human immunodeficiency virus, liver diseases such as chronic hepatitis B and C virus infections, oncology and inflammation, and severe cardiovascular and respiratory conditions. GILD was founded in 1987 and is headquartered in Foster City, California.
This month, I ranked Investment Grade Dividend Radar stocks yielding at least 3% and trading below my fair values estimates. Moreover, I wanted stocks with good growth prospects as determined by the Chowder Rule. Accordingly, I screened for stocks likely or somewhat likely to deliver annualized returns of at least 8%.
I’m long all of this month’s candidates. My positions are full-sized positions based on my dynamic and flexible portfolio target weighting strategy, so I’m not planning to add shares at this time.
Depending on your investment style and goals, I would recommend looking at the following stocks first:
- For income investors: PNW and GILD, then MRK and BMY
- For value investors: BMY and MRK, then LMT, AMGN, and MMM
- For dividend growth-oriented investors: AMGN, then LMT and GILD
As always, I advise readers to do their due diligence before investing.
Thanks for reading and take care, everybody!
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I’d be happy to answer any questions you may have!
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