Monday, June 3, 2013

7 Dividend Growth Candidates for June, 2013

One of the most useful resources for dividend growth investors is Dave Fish's list of US Dividend Champions, which provides financial data of companies with 25 or more straight years of dividend increases in spreadsheet form. Also provided are data of companies that have increased their dividends for 10-24 straight years (Contenders) and companies that have increased their dividends for 5-9 straight years (Challengers).

I use Dave Fish's spreadsheet and my watch list of dividend growth stocks to identify candidates for DivGro. I use my selection criteria to score each candidate and to assign an overall star rating for each candidate, out of a maximum of 7 stars. I then compile a dashboard of all the candidates, sorted by star rating.

The seven DivGro candidates at the top of my June dashboard are:

China Mobile Limited (CHL): (*******)
BHP Billiton plc (BBL): (*******)
NTT DoCoMo Inc (DCM): (*******)
Textainer Group Holding Ltd (TGH): (*******)
Safeway Inc (SWY): (*******)
Exxon Mobil Corporation (XOM): (*******)
Baxter International Inc (BAX): (*******)

None of these candidates earned the maximum of 7 stars. CHL earned 6 stars, only missing out on a 7th star because it has a relatively short streak of dividend increases. BAX earned only 4 stars, but is worthy of consideration because it barely misses the mark in two of my selection criteria.

Following is an excerpt of my June dashboard with some of the data I used in scoring the candidates:
I'm most interested in CHL and BBL, slightly favoring BBL because it would help to increase my sector diversification. Both are international stocks trading on the NYSE as American depository receipts (ADRs). Both pay dividends semi-annually.

If the share prices of XOM and BAX drop by 5-10%, my interest in these candidates would certainly be piqued. XOM trades at about fair value, while BAX has a P/E of 16.95, which is a little high for my taste.

The other candidates in the dashboard have one or more flaws that I cannot overlook: DCM has a high EPS payout ratio; TGH has significant debt; and SWY has significant debt and it does not trade at a good enough discount to fair value.

In the next day or so I'll do a more detailed analysis of CHL and of BBL, with the goal of purchasing shares in either one of these candidates. That would take care of one of my 2013 goals, namely to own 10 dividend growth stocks in DivGro.

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