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Saturday, March 8, 2014

10 Dividend Growth Stocks for March, 2014

This year, one of my goals is to increase the number of holdings in DivGro to 36, balanced across all 10 sectors in my watch list. To facilitate this change, I've changed the way I look for candidate stocks. I now look for the top performers by sector based on certain selection criteria.

I start with Dave Fish's CCC list and apply a series of filters to reduce the number of candidates to 30 stocks, 3 per sector. Then I score these stocks based on my selection criteria, assigning a star rating to each candidate out of a maximum of 7 stars.

The following stocks are the sector winners for March:

  NEW  Wal-Mart Stores Inc. (WMT) • rank 1 (*******) Consumer Staples
Meredith Corp. (MDP) • rank 2 (*******) Consumer Discretionary
PennyMac Mortgage Investments Trust (PMT) • rank 3 (*******) Financials
 NEW  Copa Holdings SA (CPA) • rank 7 (*******) Industrials
 NEW  SeaDrill Limited (SDRL) • rank 9 (*******) Energy
 NEW  Rogers Communications Inc. (RCI) • rank 12
(*******) Telecommunication Services
Accenture plc (ACN) • rank 13 (*******) Information Technology
BHP Billiton Ltd. (BHP) (BHP) • rank 15 (*******) Materials
 NEW  Owens & Minor Inc. (OMI) • rank 16 (*******) Health Care
 NEW  AmeriGas Partners LP (APU) • rank 19 (*******) Utilities

There are 6 newcomers compared with February's list. WMT displaced MDP at the top and PMT also makes a repeat appearance. OMI replaces JNJ as the top Health Care stock, after I purchased shares of JNJ in February. I have a single holding in the Consumer Staples sectors, so the fact that WMT is at the top is opportune.

Please note that these stocks are candidates for further analysis, not recommendations.

• Wal-Mart Stores Inc. (WMT) | growth 41 yrs | yield 2.57% @ $74.58 | 5-yr CAGR 14.15%
The first Walmart store opened in 1962 in Rogers, Arkansas. Incorporated in 1969 as Wal-Mart Stores Inc., the company is now the world's largest retailer. It is a Dividend Champion, with a 41-year streak of annual dividend increases. 

Meredith Corporation (MDP) | growth 21 yrs | yield 3.70% @ $45.83 | 5-yr CAGR 13.64%
Founded in 1902 and headquartered in Des Moines, Iowa, MDP is a media and marketing company serving American women. The stock trades about 11 percent below my fair value estimate of $51.00. MDP appears to be an attractive stock for investors seeking both growth and income. 

• PennyMac Mortgage Investment Trust (PMT) | growth 5 yrs | yield 9.70% @ $23.68 | 3-yr CAGR 43.60%
PMT is a real estate investment trust (REIT) operating as a specialty finance company investing primarily in residential mortgage loans and mortgage-related assets. The company's objective is to provide risk-adjusted returns to investors over the long-term, primarily through dividends. PMT carries more risk than other REITs due to exposure to both interest rate and credit risk. 

• Copa Holdings SA (CPA) | growth 5 yrs | yield 2.83% @ $125.62 | 5-yr CAGR 58.60%
Incorporated in 1998, CPA is a Latin American provider of airline passenger and cargo service. The stock trades at a discount of about 27% to my fair value estimate. It sports an impressive dividend growth rate of nearly 60%!

• SeaDrill Limited (SDRL) | growth 5 yrs | yield 10.61% @ $35.40 | 5-yr CAGR 19.88%

SDRL is an offshore drilling contractor providing worldwide offshore drilling services to the oil and gas industry. The company has an objective to generate competitive returns to shareholders. It offers an impressive yield and dividend growth rate. My fair value estimate is $35.35, so SDRL trades at about fair value. 

• Rogers Communications Inc. (RCI) | growth 9 yrs | yield 4.35% @ $39.30 | 5-yr CAGR 14.65%

RCI is a diversified public communications and media company based in Canada. It offers a competitive and growing dividend and currently trades at a discount of about 12% to my fair value estimate. 

• Accenture Plc (ACN) | growth 9 yrs | yield 2.33% @ $83.93 | 5-yr CAGR 28.33%
ACN is a global management consulting, technology services and outsourcing organization with headquarters in New York. The company operates in 54 countries and generated $28.6b in net revenues in 2013. It recently announced a 15% increase in its semi-annual dividend. It trades about 6% above my fair value estimate. 

• BHP Billiton Ltd. (BHP) growth 11 yrs | yield 3.43% @ $66.71 | 5-yr CAGR 10.63%
BHP is one of the world's largest diversified natural resources companies. It is involved in mineral exploration, production and processing; oil and gas exploration and development; and steel production and merchandising. My fair value estimate is $66.00.

• Owens & Minor Inc. (OMI) | growth 17 yrs | yield 2.88% @ $35.23 | 5-yr CAGR 12.48%
OMI is a Fortune 500 company providing third-party logistics services to manufacturers and suppliers of healthcare and life-science products. It currently trades at a premium of about 15% to my fair value estimate of $28.29.

• AmeriGas Partners LP (APU) | growth 9 yrs | yield 7.93% @ $42.10 | 5-yr CAGR 5.59%
APU is publicly traded master limited partnership. Operating as a holding company, APU distributes retail propane in all 50 states in the US. It offers an impressive distribution yield, but growth over the last 5 years has been lackluster. APU trades at a 10%-discount to my fair value estimate. 

With enough cash for one purchase, I'll be buying shares in one of these candidates soon. I'll probably look at WMT and MDP.

Full Disclosure: Long JNJ

Any shares on this month's list that interest you? Do you own any shares in these 10 companies?


  1. ACN intrigues me. It's a lot like ADP where there's pretty much no capex so everything turns into free cash flow. I like OMI the company but not the stock right now, it's a little too high. WMT is also high on my list of potential further investment but that $0.01 increase was pretty disappointing. I know the DG won't be the same % every year but I expected a 5-7% increase. I hope they make up for it with next year's increase or I'll be getting worried.

    1. I agree, OMI is too expensive right now. ACN is a bit pricey too, but it sure has a juicy CAGR. WMT's latest dividend increase is disappointing, I agree. The company has experienced some headwinds, lately, and the mediocre increase probably is partly due to that. I'm going to analyze WMT, nevertheless, to see if I'll invest. I don't own any WMT shares in DivGro yet...

      Take care!

  2. Even after a lackluster dividend increase, WMT is still on the list for me. Otherwise, I'm still looking at a few companies not on this list like PEP and GE.

    1. As I mentioned in my post, I need another stock in the Consumer Staples sector and WMT is a good candidate for me. While analyzing WMT, I'll look carefully to see if there is anything fundamental I should be worried about. PEP is certainly a good alternative for WMT in the Consumer Staples sector.

      GE seems to be on a recovery path, but 5 years ago, during the financial crisis, they decreased their dividend significantly, whereas other dividend payers did not.

  3. I'm really not a fan of WMT because I don't think they have a lot of growth potential over the next 3 years. I do really like MDP, RCI, and ACN which are all on my watch list too.

    1. I'm a little skeptical myself, but I'm going to look at WMT carefully to see if my skepticism is warranted. The runner-up to WMT in the Consumer Staples sector was PM, but I own MO already, so I'm not interested in PM right now.


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