Ten High-Quality Dividend Growth Stocks Trading Well Above Fair Value

In a recent companion article, I presented ten high-quality dividend growth stocks that are trading well below fair value. I presented 7-year yield channel charts for each stock to illustrate how the price line has moved lower to meet the undervalued yield line.

This article considers the opposite scenario, presenting ten high-quality dividend growth stocks that are trading well above fair value (at least when considering current yield relative to historical yield patterns).

In my view, it is useful to know when a stock becomes overvalued. I don't want to buy shares of a stock at premium prices. And, in some scenarios, replacing an overvalued stock with an equivalent undervalued stock can be quite lucrative. One could earn a higher yield and also increase the upside potential of your investment dollars. On the other hand, when selling an overvalued stock you're likely making a profit, which will be taxed as capital gains in the case of taxable accounts.

Ten High-Quality Dividend Growth Stocks Trading Well Below Fair Value

I'm rebooting my series of DivGro Pulse articles to focus on high-quality dividend growth stocks trading at extreme yield levels.

When such stocks are trading at historically high yields, they are undervalued and worth considering as potential buys. Conversely, when these stocks are trading at historically low yields, they are overvalued and candidates for potential sells.

Last year I wrote an article about Yield Channel Charts, a tool for dividend growth investors to assess market valuation relative to historical yield patterns. Yield channels can be seen as "safety zones" for stock prices. As long as the stock price stays near the center of the yield channel, the stock is fairly valued.

Dividend Increases: April 1-5, 2019

Companies that regularly raise their dividend payments show confidence in future earnings growth potential.

One way to identify dividend growth stocks for further analysis is to monitor dividend increases.

Last week, three companies announced dividend increases, including one of the stocks I own. And it happens to be the largest dividend increase I'm reporting today!

Aflac: Japan’s Largest Cancer Insurer

By Peter Bosworth of www.wealthyretirement.com.

Until recently, cancer was a taboo word in Japan.

In 1987 Emperor Hirohito underwent surgery for internal hemorrhaging due to a cancerous small intestine. Japanese officials stoutly denied there were any signs of cancer, though to the Japanese public the writing was on the wall.

It was common then for cancer patients to be denied the right to know their diagnosis. Later on, instead of outright denial, doctors would dance around the issue, and give certain nonverbal hints to patients. A 1988 piece on the subject from the Los Angeles Time quotes Hiroshi Wagatsuma, an anthropologist who researched this tacit communication: “Even if the doctor says nothing, the patient knows that he has cancer; and though nothing is said, the doctor knows that the patient knows.”

Monthly Review of DivGro: March 2019

Welcome to the March review of DivGro, my portfolio of dividend growth stocks! Quarter-ending months are exciting, as many of the stocks I own pay dividends in these months and I usually set a new record for monthly dividend income in quarter-ending months.

March did not disappoint! I received dividends totaling $3,220 from 43 stocks in my portfolio, a new record for monthly dividend income! Year over year, DivGro's dividend income increased by 28%. So far in 2019, I've collected $6,724 in dividends or about 27% of my 2019 goal of $25,200.

Looking at how the month's activities impacted DivGro's projected annual dividend income (PADI), I note that five DivGro stocks announced dividend increases in March. Additionally, I opened one new position and added shares to five existing positions. On the other hand, I closed out one high-yielding position. Unfortunately, the net result of these changes is that projected annual dividend income (PADI) decreased by about 0.6% in March. Year over year, PADI increased by 39%.

Options Update: March 2019

March was another busy month for options trading. I collected nearly $2,500 in options income this month and I'm happy to report that I'm now ahead of pace as far as my options income goal for 2019 is concerned.

As usual, this article will cover options transactions I executed this month, and I'll summarize the options that will expire in April and May. I'll conclude with the usual running tally of options income received versus options income secured.

Dividend Increases: March 25-29, 2019

I monitor dividend increases to identify candidates for further analysis. Companies can only raise their dividends sustainably if they grow earnings sufficiently.

Last week, three companies I monitor announced dividend increases. This article provides a summary and includes a table of ex-dividend dates for the next two weeks.

Dividend Increases: March 18-22, 2019

This article provides a summary of recent dividend increases and upcoming ex-dividend dates. I monitor dividend increases to identify candidates for further analysis.

In the past week, six companies declared dividend increases, including one of the stocks I own, Raytheon (RTN) with a very welcome 9% increase. The stock now yields 2.09% at $180 per share.

Dividend Increases: March 11-15, 2019

I monitor dividend increases to identify candidates for further analysis. Companies can only raise their dividends sustainably if they grow earnings sufficiently.

This article provides a summary of last week's dividend increases and upcoming ex-dividend dates. Two of my DivGro stocks will pay out higher dividends! Both are small increases but both companies increase their dividends multiple times every year.

All the Dogs!

Dogs of the Dow is an investment strategy that targets the ten top-yielding stocks in the Dow Jones Industrial Average (DJIA) for investment each year. Popularized by Michael B. O'Higgins in his 1991 book, Beating the Dow, this simple strategy frequently outperforms the DJIA and seems to outperform the index over longer periods of time.

The strategy is based on the idea that blue-chip companies pay consistent (and increasing) dividends, while their stock prices fluctuate based on market conditions. So, if the dividend yield is higher than usual, the stock price likely is lower than usual. Investors following this strategy should reap the benefits of higher yields and above-average stock-price gains.

I don't actively follow the Dogs of the Dow strategy, but I happen to own all the dogs in my DivGro Portfolio.