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7 Dividend Growth Stocks For March 2022

These high-quality Dividend Radar stocks are undervalued and may deliver annualized returns of 8% or more, according to the Chowder Rule.

In my monthly 7 Dividend Growth Stocks series, I present seven dividend growth stocks from my watch list for further analysis and possible investment. I use different screens every month to highlight specific elements of dividend growth [DG] investing.

To compile this month’s candidates, I screened for undervalued stocks with (C#’s) that indicate some likelihood of delivering annualized returns of 8% or higher. Value and growth-oriented dividend investors will find some high-quality candidates worth consideration.

and my .

In case you missed previous articles in this series, here are links to them:

, , and . 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.

(dated March 25, 2022) contains 750 stocks. Of these, 159 are high-quality DG stocks with quality scores in the range of 19-25. Moreover, 217 stocks yield at least 3% and 330 are discounted by at least 3% relative to my FV estimate. Furthermore, 517 are likely or somewhat likely to deliver annualized returns of at least 8%, according to the Chowder Rule (see below).

Only 35 stocks pass all three screens.

'
  • Forward Dividend Yield
  • The Chowder Rule

    The so-called Chowder Rule postulates that DG stocks with a certain mix of forward dividend yield and 5-year dividend growth rate [DGR] likely will deliver annualized returns of at least 8%.

    Specifically, we determine the C# by adding a stock’s forward dividend yield to its 5-year DGR. Stocks likely will deliver annualized returns of at least 8% if the following conditions hold:

    • For stocks yielding less than 3%: C# ≥ 15
    • For stocks yielding at least 3%: C# ≥ 12
    • For utilities yielding at least 4%: C# ≥ 8

    I use a somewhat nuanced version of the Chowder Rule, color-coding cells in my spreadsheets according to the likelihood of delivering annualized returns of at least 8%:

    • Green indicates stocks likely to deliver annualized returns of 8%
    • Yellow indicates stocks are somewhat likely to deliver annualized returns of 8%
    • Red indicates stocks are unlikely to deliver annualized returns of 8%

    To differentiate between yellow and red candidates, I use the following C# thresholds:

    • For stocks yielding less than 3%: red < 10 ≤ yellow < 15 ≤ green
    • For stocks yielding at least 3%: red < 8 ≤ yellow < 12 ≤ green
    • For utilities yielding at least 4%: red < 5 ≤ yellow < 5 ≤ green

    For this month’s article, I allowed only green and yellow C#’s.

    7 Top-Ranked Dividend Growth Stocks for March

    Here are top-ranked dividend growth stocks that passed this month’s screens:

    Screen Shot 2022-03-28 at 10.57.45 AM

    I own all of these stocks in my DivGro portfolio.

    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
  • The Fwd Yield column is colored green if Fwd Yield ≥ 5-Avg Yield.

    Key metrics and fair value estimates of the Top 7 Dividend Growth Stocks (includes data sourced from Dividend Radar).

    Key metrics and fair value estimates of the Top 7 Dividend Growth Stocks (includes data sourced from Dividend Radar).

    Next, let's look at each stock in turn. All data and charts are courtesy of .

    Note that the valuations below from Portfolio Insight differ from my risk-adjusted Buy Below prices because I allow premium valuations for the highest-quality stocks but require discounted valuations for lower-quality stocks.

    Visa Inc (V)

    Headquartered in San Francisco, California, V operates as a payments technology company worldwide. The company facilitates commerce through the transfer of value and information among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. V provides its services under the Visa, Visa Electron, Interlink, V PAY, and PLUS brands.

    V valuation and key metrics, as well as a performance comparison with SPY over the past decade

    V valuation and key metrics, as well as a performance comparison with SPY over the past decade

    V non-GAAP EPS and dividends paid (TTM), with stock price overlay

    V non-GAAP EPS and dividends paid (TTM), with stock price overlay

    V is rated Exceptional (quality score: 25) and its payout ratio is “very low for most companies”, according to Simply Safe Dividends. According to Portfolio Insight, V has a 1-year upside of 35%. Given its discount of 15% relative to my Buy Below price, I believe the stock is suitable for both value and growth-oriented dividend investors.

    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.

    MRK valuation and key metrics, as well as a performance comparison with SPY over the past decade

    MRK valuation and key metrics, as well as a performance comparison with SPY over the past decade

    MRK non-GAAP EPS and dividends paid (TTM), with stock price overlay

    MRK non-GAAP EPS and dividends paid (TTM), with stock price overlay

    MRK is rated Excellent (quality score: 23-24) and its payout ratio is “low for most companies”, according to Simply Safe Dividends. According to Portfolio Insight, MRK has a 1-year upside of 17%. MRK’s discount of 17% relative and forward yield of 3.39% make the stock suitable for value and income-oriented dividend investors.

    Mastercard Incorporated (MA)

    MA, a technology company, provides transaction processing and other payment-related products and services in the United States and internationally. The company offers payment solutions and services under the MasterCard, Maestro, and Cirrus brands. MA was founded in 1966 and is headquartered in Purchase, New York.

    MA valuation and key metrics, as well as a performance comparison with SPY over the past decade

    MA valuation and key metrics, as well as a performance comparison with SPY over the past decade

    MA non-GAAP EPS and dividends paid (TTM), with stock price overlay

    MA non-GAAP EPS and dividends paid (TTM), with stock price overlay

    MA is rated Excellent (quality score: 23-24) and its payout ratio is “very low for most companies”, according to Simply Safe Dividends. According to Portfolio Insight, MA has a 1-year upside of 42%. Given its discount of 10% relative to my Buy Below price, the stock should be attractive to both value and growth-oriented dividend investors.

    Medtronic plc (MDT)

    MDT manufactures and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide. The company operates in four segments: Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group, and Diabetes Group. MDT was founded in 1949 and is headquartered in Dublin, Ireland.

    MDT valuation and key metrics, as well as a performance comparison with SPY over the past decade

    MDT valuation and key metrics, as well as a performance comparison with SPY over the past decade

    MDT non-GAAP EPS and dividends paid (TTM), with stock price overlay

    MDT non-GAAP EPS and dividends paid (TTM), with stock price overlay

    MDT is rated Excellent (quality score: 23-24) and its payout ratio is “low for most companies”, according to Simply Safe Dividends. According to Portfolio Insight, MDT has a 1-year upside of 10%. Given its discount of 13% relative to my Buy Below price, the stock is suitable for value-oriented dividend investors.

    BlackRock, Inc (BLK)

    BLK is an investment management company that provides a range of investment and risk management services to institutional and retail clients across the world. The company’s offerings include single and multi-asset class portfolios investing in equities, fixed income, alternatives, and money market instruments. BLK was founded in 1988 and is based in New York City.

    BLK valuation and key metrics, as well as a performance comparison with SPY over the past decade

    BLK valuation and key metrics, as well as a performance comparison with SPY over the past decade

    BLK non-GAAP EPS and dividends paid (TTM), with stock price overlay

    BLK non-GAAP EPS and dividends paid (TTM), with stock price overlay

    BLK is rated Excellent (quality score: 23-24) and its payout ratio is “edging high for asset managers”, according to Simply Safe Dividends. According to Portfolio Insight, BLK has a 1-year upside of 8%. Given its discount of 11% relative to my Buy Below price, the stock should be attractive to value-oriented dividend investors.

    Air bovada and Chemicals, Inc (APD)

    Founded in 1940 and headquartered in Allentown, Pennsylvania, APD produces atmospheric gases (such as oxygen and nitrogen), process gases (such as hydrogen and helium), and specialty gases, as well as the equipment for the production and processing of gases. APD also provides semiconductor materials, refinery hydrogen, natural gas liquefaction, and advanced coatings and adhesives.

    APD valuation and key metrics, as well as a performance comparison with SPY over the past decade

    APD valuation and key metrics, as well as a performance comparison with SPY over the past decade

    APD non-GAAP EPS and dividends paid (TTM), with stock price overlay

    APD non-GAAP EPS and dividends paid (TTM), with stock price overlay

    APD is rated Excellent (quality score: 23-24) and its payout ratio is “edging high for most companies”, according to Simply Safe Dividends. According to Portfolio Insight, APD has a 1-year upside of 10%. With a discount of 13% relative to my Buy Below price, I think the stock is suitable for value-oriented dividend investors.

    Comcast (CMCSA)

    Founded in 1963 and headquartered in Philadelphia, Pennsylvania, CMCSA is a global media and technology company. The company operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, Theme Parks, and Sky segments. CMCSA delivers broadband, wireless, and video connectivity; creates, distributes, and streams entertainment, sports, and news; and operates theme parks and resorts.

    CMCSA valuation and key metrics, as well as a performance comparison with SPY over the past decade

    CMCSA valuation and key metrics, as well as a performance comparison with SPY over the past decade

    CMCSA non-GAAP EPS and dividends paid (TTM), with stock price overlay

    CMCSA non-GAAP EPS and dividends paid (TTM), with stock price overlay

    CMCSA is rated Excellent (quality score: 23-24) and its payout ratio is “low for most companies”, according to Simply Safe Dividends. CMCSA has a 1-year upside of 20%, according to Portfolio Insight. Moreover, given that CMCSA trades 24% below my Buy Below price, I think the stock is suitable for growth and value-oriented dividend investors.

    Concluding Remarks

    Screen Shot 2022-03-28 at 11.24.14 AM

    This month, I screened To compile this month’s candidates, I screened for undervalued stocks with Chowder Numbers (C#’s) that indicate some likelihood of delivering annualized returns of 8% or higher. Value and growth-oriented dividend investors will find some high-quality candidates worth consideration.

    As mentioned earlier, I’m long all of this month’s candidates. Based on my , three positions are somewhat underweight, APD, MDT, and CMCSA:

    Screen Shot 2022-03-28 at 11.25.21 AM

    Although my V and BLK positions are somewhat overweight, I don't like trimming stocks to achieve ideal target weights. There are tax implications to selling winning positions, so my strategy is to invest in underweight positions (rather than trim overweight positions) and slowly move my portfolio towards my ideal target weights.

    All of this month’s stocks are discounted by at least 10% to my Buy Below prices, making them suitable for value-oriented dividend investors. With 1-year upsides of 20% or above, CMCSA, MA, and V should be attractive to growth-oriented dividend investors. Finally, only one stock yields more than 3%, MRK, which should make the stock an interesting candidate for income investors.

    As always, I advise readers to do their due diligence before investing.

    Thanks for reading and take care, everybody!

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    Also read:

    7 Dividend Growth Stocks For February 2022

    Top 7 Dividend Growth Stocks Picks For 2022

    8 Best Defensive Dividend Growth Stocks

    4 High Yield Closed-End Funds For Your Income Portfolio

    2 Dividend Stocks On My Buy List

    Focusing On Income, Too Many Stocks & Wrong Valuation: More Mistakes You Could Be Making

    18 Dividend Stocks To Consider For The Next Decade

    Hybrid Funds To Complement High Yield Portfolios