Thursday, July 25, 2013

7 Dividend Growth Candidates for July, 2013

Last month I started a new series of posts in which I'm identifying candidates for DivGro. I score stocks in my watch list of dividend growth stocks based on my selection criteria, assigning a star rating to each candidate out of a maximum of 7 stars.  I then compile a dashboard of candidates, sorted by star rating.

Due to my 2-week vacation this month, I'm rather late with this post. I analyze data in Dave Fish's list of US Dividend Champions, which he publishes at the beginning of every month. Rather than using data that are 3 weeks old, I've spent some time to update the data before doing my analysis.

The ten candidates at the top of my July list are NTT, INTC, SXL, CHL, PRE, AFL, NSC, COP, TGH, and BBL. I already own shares of the highlighted stocks in DivGro. While it is great to confirm that 6 of my 10 DivGro stocks are still top candidates, I'd like to expand my diversification by adding new stocks to DivGro before buying more shares in stocks I already own. To that end, the 7 candidates for July are:

Sunoco Logistics Partners LP (SXL): (*******)
China Mobile Limited (CHL): (*******)
Norfolk Southern (NSC): (*******)
Textainer Group Holding Ltd (TGH): (*******)
International Business Machines (IBM): (*******)
ExxonMobil Corp. (XOM): (*******)
Astrazeneca plc (AZN): (*******)

None of these candidates earned the maximum of 7 stars (only NTT and INTC did):
  • Master limited partnership SXL does not yield at least 6.75% as required by my MLP criteria
  • CHL earned 6 stars because it has a relatively short streak of dividend increases. 
  • NSC misses on yield (< 2.75%) and Debt/Equity ratio.
  • TGH has a very high Debt/Equity ratio and a relatively short streak of dividend increases.
  • IBM's yield is below 2%, its payback rate is low, and its Debt/Equity ratio is high. 
  • XOM misses on yield (< 2.75%) and on payback rate, and is slightly overvalued. 
  • AZN is slightly overvalued and has a high, possibly unsustainable yield.
Following is an excerpt of my July dashboard with some of the data I used in scoring the candidates:
In my stock analysis of CHL last month, I suggested that I might revisit CHL again when I have more cash. With CHL making the list again this month, I think its time to move on it.

Other candidates that seem interesting include high yielders TGH and AZN and large caps IBM and XOM. In the next few days, I'll look into doing stock analyses of these candidates to determine if I'll add one or more of them to DivGro.

Full Disclosure: Long NTT, INTC, PRE, AFL, COP, BBL 

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