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Monday, December 2, 2013

7 Dividend Growth Candidates for December, 2013

I've just updated my watch list of dividend growth stocks. To evaluate candidates in my watch list, I score them based on selection criteria and assign a star rating to each candidate out of a maximum of 7 stars.

This month, the top ten stocks are CHLINTC, NTT, CVX, BBLCOP, LMT, RCI, MSFT and IBM. I already own shares in the highlighted stocks. CHL, INTC, NTT, and CVX are 7-star stocks. The others are 6-star stocks.

Because I'm still expanding the number of holdings in DivGro rather than adding to existing holdings, I look for 7 stocks that I don't own yet, for further analysis. The 7 candidates for December are:

Lockheed Martin (LMT): (*******) Industrials
Rogers Communications Inc. (RCI): (*******) Telecommunications
International Business Machines (IBM): (*******) Information Tech
Shaw Communications Inc. (SJR): (*******) Consumer Discretionary
BOK Financial Corp. (BOKF): (*******) Financials
Wal-Mart Stores Inc. (WMT): (*******) Consumer Staples
Northeast Utilities (NU): (*******) Utilities

Below is the December dashboard with some of the data used in scoring the candidates:
The markets continue to move stubbornly higher, so its really hard to find good value now. Only two of my 7 candidates for December are trading at a discount of more than 5% to fair value.

IBM makes another repeat appearance in my dashboard, for the third month in a row. It has a strong dividend growth rate, but the yield on offer is on the low side. I prefer yields above 2.75. Nevertheless, I'm not discounting IBM altogether for that reason. With it knocking on the door three times, I think I'll do an analysis of the stock this month to see if its a good time to buy shares.

BOKF, the other stock trading at a discount to fair value of more than 5%, looks quite attractive. I think its worth a look, though DivGro is already somewhat heavily weighed in the Financial sector.

RCI is trading at about fair value. Like IBM, RCI is making its third consecutive appearance in my dashboard. It has an attractive yield and a superb dividend growth rate, though the high Debt to Equity ratio is a concern.

Even though WMT is trading near 52-week highs, it is trading at about fair value. It is a Dividend Champion, having raised its dividend for 39 years in a row. I currently own no stocks in DivGro in the Consumer Staples sector, so for that reason WMT is interesting.

SJR repeats from last month. As a Consumer Discretionary sector stock, SJR is of interest as I currently don't have any stocks in that sector in DivGro. It would be more attractive if the price was around $20.

NU is the most attractive stock I could find in the Utilities sector, another sector with no coverage in DivGro. NU would be more attractive at $40.50.

Finally, LMT is trading at a premium of nearly 15% to fair value and has a very high Debt to Equity ratio. Besides those objections, LMT is trading near its all-time high of $144.43. However, LMT has a good dividend yield and a very strong dividend growth rate.

With enough cash for one purchase, I'll be buying shares in one of these candidates soon. To increase DivGro's sector diversification, I'd probably look at SJR and NU first. From a value standpoint, IBM and BOKF are better, though. I have another bonus deposit on the way, too, so I'll have some flexibility to buy additional stocks later this month.

Thanks for reading! What stocks are you considering for purchase this month?

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


  1. My pick in this list would be RCI. This is based on looking at F.A.S.T. Graph. good luck to you.

    1. Thanks for the note. F.A.S.T. Graph presents an interesting way to look at stocks. I'm assuming you've signed up for it. I haven't, though once I did a trial.


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