Welcome to October's edition of my monthly series of high-quality dividend growth stocks suitable for further analysis and possible investment.
I select DG stocks from Dividend Radar which tracks stocks trading on U.S. Exchanges with dividend increase streaks of at least five years. Dividend Radar is maintained and published by Portfolio Insight every Friday as a free resource to DG investors.
To highlight different DG stocks every month, I use different screens to narrow down approximately 750 Dividend Radar stocks. This month, I screened for Dividend Contenders trading well below my Buy Below prices with solid growth and income prospects, and safe dividends.
I used very stringent screens this month, and exactly seven Dividend Contenders made the cut! That's seven out of 747 Dividend Radar in the September 24 edition, or seven of 314 Dividend Contenders.
I own five of the seven stocks in my DivGro portfolio.
To see this month's seven top-ranked stocks, please read this article at TheStreet.com.
Please note that I'll continue to publish my monthly series 10 Dividend Growth Stocks on Seeking Alpha. I use different screens for each of these article series, so they won't cover the same stocks.
FerdiS, can you please double check your AMGN buy below price in your Oct article for thestreet.com? Your chart indicates a 12 month target price of $233, but your buy below is $263. That seems like quite a premium. Are those numbers correct? Thank you again for your great work and consideration!
ReplyDeleteFair value and target prices are not necessarily or directly related, though we sure want them to be!
DeleteBut let me explain these numbers a bit more:
My Buy Below price for stocks rated excellent allows a premium of 5% above MY fair value estimate, which is $251 for AMGN. (251*1.05 = 263).
The 12-month target price calculation is from Portfolio Insight using their PE-based fair value chart, extrapolating out 12 months. It essentially assumes “reversion to the mean”, so it is a simple calculation. A stock that is wildly overvalued may have a 12-month target that is lower than its current price, for example, even though the chart itself has an overall upward trend.
As you know, there are other ways of estimating fair value and widely different opinions on which method is most appropriate. I worked with Portfolio Insight to get my yield channel charts implemented, which is a different way of assessing fair value.
A quick way to check fair value for established dividend growth stocks is by dividing the annual dividend payout ($7.04 for AMGN) by its 5-year average yield (2.80%) (7.04/2.8% = 251)
You may have seen this approach utilized in some of my other articles.
BTW, MY fair value estimate is not just this quick way of estimating fair value, but in the case of AMGN, my fair value and the quick way happens to agree.
Hope this helps.
Thank you for the clarification and taking the time to respond! Much appreciated!
DeleteYou’re welcome!
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