Monday, October 7, 2013

7 Dividend Growth Candidates for October, 2013

I keep a watch list of dividend growth stocks as candidates for DivGro. It contains tickers of companies with continuous streaks of dividend increases, the so-called CCC stocks (Champions, Contenders, and Challengers) maintained by Dave Fish, as well as a few other dividend payers that pay (but do not raise) dividends regularly.

The watch list is organized by sector and by yield. Every month, I update the watch list to reflect any additions or deletions of CCC stocks. I also adjust for changes in dividend yield, which happen when stock prices or dividend payments change.

This month, two watch list stocks were affected. I deleted DX after its recent dividend decrease, and I moved PNNT to the non-CCC list following its deletion for Dave Fish's CCC stocks. Note that I recently bought shares of PNNT for DivGro.

Every month, I score stocks in my watch list based on my selection criteria. I assign a star rating to each candidate out of a maximum of 7 stars and compile a dashboard of candidates, sorted by star rating. This month, the top ten stocks are CHL, INTC, NTT, CVX, XOM, SNP, RCI, COP, MSFT, and PG.

I already own shares in the highlighted stocks. To diversify my portfolio, I choose 7 stocks from my dashboard that I don't own yet, for further analysis. The 7 candidates for October are:

ExxonMobil Corp. (XOM): (*******) Energy
China Petroleum & Chemical Corp. (SNP): (*******) Energy
Rogers Communications Inc. (RCI): (*******) Telecommunications
Procter & Gamble Co. (PG): (*******) Consumer Staples
ACE Limited (ACE): (*******) Financials
International Business Machines (IBM): (*******) Information Tech
Qualcomm Inc. (QCOM): (*******) Information Tech

Below is the October dashboard with some of the data used in scoring the candidates:
When XOM made my 7-Candidates list in June and July, it was as a 5-star stock, missing out on my dividend yield and fair value discount criteria. This time around, XOM is a 7-star stock and worthy of another look.

SNP makes a repeat appearance from last month. It has an attractive yield, but it pays dividends in June and September, so you'd have to wait more than 6 months for the next payment!

PG also makes a repeat appearance, though it still trades at just about fair value and a somewhat high P/E ratio. I'd be more interested in PG if its price dropped 5-10%.

RCI is a first-timer. It has an attractive yield and a super dividend growth rate. One warning sign to look into, would be its high Debt to Equity ratio.

I've had ACE, IBM, and QCOM in my 7-Candidates list before. All are solid dividend growth stocks, though I really like to see an initial yield above 2.75.

I currently have enough cash for only one purchase. Looking at these candidates, I'd probably choose between XOM, RCI, and IBM. Stand by for my analysis and next stock purchase!

Full Disclosure: Long PNNT, CHL, INTC, NTT, CVX, COP, MSFT

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