Dividend Growth Stocks for the Intelligent Investor – November 2015

Dividend Growth Stocks

Dividend growth investing is a very popular approach which can fit within the ModernGraham methods. This article will look at companies reviewed by ModernGraham which have grown their dividends annually for at least the last 20 years.

Recently, I began tracking the number of years a company has grown its dividend, and providing that information in my individual company valuations. I have covered 277 companies since that tracking began. Eventually I will have this data on each of the more than 550 companies covered by ModernGraham, so this list should continue to grow for the next few months.

Out of the 277 companies on which I have dividend growth data, only 33 have grown dividends annually for at least the last 20 years. Here is an overview of those companies:

The Elite

The following companies have been rated as the most undervalued and suitable for either the Defensive Investor or the Enterprising Investor:

AFLAC Incorporated (AFL)

Aflac Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.92 in 2011 to an estimated $6.07 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

Franklin Resources, Inc. (BEN)

Franklin Resources Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.23 in 2011 to an estimated $3.41 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.47% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

Dover Corp (DOV)

Dover Corporation qualifies for both the Defensive Investor and the Enterprising Investor. Both investor types are only initially concerned with the low current ratio. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.58 in 2011 to an estimated $5.03 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.72% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

Helmerich & Payne, Inc. (HP)

Helmerich & Payne Inc. qualifies for the more conservative Defensive Investor or the Enterprising Investor. The company passes all of the requirements of both investor types, a rare accomplishment. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the valuation.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.24 in 2011 to an estimated $4.77 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

Illinois Tool Works Inc. (ITW)

Illinois Tool Works Inc. qualifies for the both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the high PB ratio. The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.19 in 2011 to an estimated $5.46 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.33% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

People’s United Financial, Inc. (PBCT)

People’s United Financial Inc. is suitable for either the Defensive Investor or the Enterprising Investor. The company passes all of the requirements of both investor types, a rare accomplishment indicative of the strong fundamentals. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.40 in 2011 to an estimated $0.78 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.44% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

Ross Stores, Inc. (ROST)

Ross Stores Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PEmg and PB ratios. The Enterprising Investor is only initially concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.07 in 2012 to an estimated $2.11 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

T. Rowe Price Group Inc (TROW)

T.Rowe Price Group Inc. qualifies for both the Defensive Investor and for the Enterprising Investor. The Defensive Investor is only concerned by the high PB ratio while the Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.38 in 2011 to an estimated $4.16 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.03% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

The Good

The following companies have been rated as fairly valued and suitable for either the Defensive Investor or the Enterprising Investor:

Chubb Corp (CB)

Chubb Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $6.08 in 2011 to an estimated $7.68 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.63% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

Cintas Corporation (CTAS)

Cintas Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.83 in 2012 to an estimated $3.33 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)

Genuine Parts Company (GPC)

Genuine Parts Company qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PB ratio. The Enterprising Investor is only initially concerned by the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.08 in 2011 to an estimated $4.43 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 5.18% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

W W Grainger Inc (GWW)

W.W. Grainger Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $7.12 in 2011 to an estimated $11.08 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 5.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

Parker-Hannifin Corp (PH)

Parker Hannifin Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The company meets all of the initial requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $5.65 in 2011 to an estimated $6.78 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 3.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

VF Corp (VFC)

VF Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.48 in 2011 to an estimated $2.70 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 9.13% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)

The Full List

To view the MG Value and PEmg information, you must be logged in as a premium member. Clicking on the company name will take you to the company’s latest valuation.

For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield
ADM Archer Daniels Midland Company E 11/4/2015 $43.02 2.60%
ADP Automatic Data Processing E 9/25/2015 $86.96 2.25%
AFL AFLAC Incorporated D 9/11/2015 $64.17 2.56%
ALB Albemarle Corporation D 8/12/2015 $54.22 2.14%
AOS A. O. Smith Corp E 8/21/2015 $77.01 0.99%
BDX Becton Dickinson and Co S 8/19/2015 $151.00 1.59%
BEN Franklin Resources, Inc. D 9/4/2015 $41.13 1.46%
BF.B Brown-Forman Corporation S 9/25/2015 $106.85 #REF!
BMS Bemis Company, Inc. E 9/4/2015 $45.22 2.48%
CB Chubb Corp D 9/21/2015 $129.21 1.76%
CLX Clorox Co S 9/10/2015 $124.22 2.48%
CTAS Cintas Corporation E 8/24/2015 $91.49 1.15%
DOV Dover Corp E 9/1/2015 $65.00 2.58%
ESS Essex Property Trust Inc S 10/9/2015 $221.84 2.60%
EXPD Expeditors International of Washington E 10/1/2015 $49.08 1.47%
GPC Genuine Parts Company E 9/8/2015 $91.32 2.69%
GWW W W Grainger Inc E 10/6/2015 $210.65 2.22%
HP Helmerich & Payne, Inc. D 8/16/2015 $60.25 4.56%
HRL Hormel Foods Corp E 9/21/2015 $67.22 1.49%
ITW Illinois Tool Works Inc. D 10/2/2015 $92.93 2.37%
JNJ Johnson & Johnson D 9/3/2015 $101.96 2.94%
LLTC Linear Technology Corporation E 10/13/2015 $44.73 2.68%
MDT Medtronic PLC D 10/13/2015 $76.14 2.00%
MKC McCormick & Company, Incorporated S 8/15/2015 $85.05 1.88%
MMM 3M Co D 9/10/2015 $158.90 2.58%
NEE NextEra Energy Inc S 8/13/2015 $103.22 2.98%
PBCT People’s United Financial, Inc. D 8/24/2015 $16.22 4.13%
PH Parker-Hannifin Corp D 9/8/2015 $105.80 2.38%
ROST Ross Stores, Inc. E 8/23/2015 $51.62 0.91%
SIAL Sigma-Aldrich Corporation E 9/22/2015 $139.49 0.66%
SYY SYSCO Corporation S 9/8/2015 $40.79 2.94%
TROW T. Rowe Price Group Inc D 9/22/2015 $76.19 2.73%
VFC VF Corp E 9/8/2015 $67.93 2.18%

Disclaimer:

The author held a long position in Dover Corporation but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here. This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions. Please also read our full disclaimer.