Saturday, August 3, 2013

7 Dividend Growth Candidates for August, 2013

Every month I score stocks in my watch list based on 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. The basis for this analysis is Dave Fish's list of US Dividend Champions, which he publishes at the beginning of every month. I also use stock ratings from several other sources, including MorningStar,  The Motley Fool, S&P Capital IQ, Thomson Reuters, and Zacks.

The ten stocks at the top of my August list are NTT, MSFT, INTC, CHL, NSC, PRE, TRV, CB, AFL, and COP. I already own shares of the highlighted stocks in DivGro. In order to diversify my portfolio, I select 7 candidates from the list that I don't own yet, for further analysis. 

The 7 candidates for August, along with their respective star ratings and sectors, are:

Microsoft Corp. (MSFT): (*******)
Technology
Norfolk Southern (NSC): (*******)
Services
ACE Limited (ACE): (*******)
Financial
Chubb Corp. (CB): (*******)
Financial
Coach Inc. (COH): (*******)
Services
Qualcomm Inc. (QCOM): (*******)
Technology
Caterpillar Inc. (CAT): (*******)
Conglomerates
Here is an excerpt of my August dashboard with some of the data I used in scoring the candidates:
With a maximum of 7 stars, MSFT looks like a great candidate. One concern with buying MSFT for DivGro is that I already own 3 other stocks in the Technology sector. Nevertheless, I'll analyze MSFT and consider buying shares depending on my findings, despite potentially overloading on Technology stocks. I'm not happy with NTT's recent dividend decrease, so selling NTT could reduce my Technology exposure if needed.

NSC and ACE each earned 6 stars. NSC is a repeat candidate from last month, so perhaps its time for a thorough analysis to determine if its higher level of debt is acceptable. ACE misses on yield and on payback rate, though its discount of nearly 30% to fair value is interesting.

CB, COH, QCOM, and CAT each earn 5 stars:
  • CB has an impressive dividend streak of 48 years, but low yield and growth numbers
  • COH has a short but impressive record of dividend growth (5 years; 60% weighted average)
  • QCOM misses on yield and on payback rate; it also is a Technology sector stock
  • CAT has a dividend streak of 20 years, but a rather high Debt to Equity ratio.
With about $8,000 cash available, I'll analyze one or more of these candidates in the next week or so before deciding on my next purchase(s).

What dividend growth stocks are you considering?

Full Disclosure: Long NTT, INTC, CHL, PRE, TRV, AFL, COP

2 comments :

  1. Can you explain the 'confidence factor' in your candidates dashboard ? I'm not familiar with this criteria. Thx

    ReplyDelete
    Replies
    1. Hi Captain Dividend!

      'Confidence factor' is a scoring system defined in Dave Fish's Dividend Champions spreadsheet. See the Notes tab. Essentially, it gauges the confidence in the continuation of dividend increase streaks, by "smashing together" 20 items of dividend-related data. In my view, it is useful as a screening tool.

      Cheers
      FerdiS

      Delete

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