Finding attractively valued dividend growth stocks is getting harder and harder to do.  The overall market has been on a relentless advance for many years now, and high quality dividend paying growth stocks have been leaders.  Consequently, valuations have become extended beyond historical norms and I contend prudence.  Nevertheless, there are attractive dividend growth stocks available if you’re willing to look hard enough.

In part 1 of this two-part series I reviewed the prestigious S&P Dividend Aristocrats looking for attractively valued dividend growth stocks.  Although I was able to identify a few potentially attractive research candidates in the Dividend Aristocrats, I lamented that the pickings were slim.  I also presented examples of extremely high quality Dividend Aristocrats that have become significantly and uncharacteristically overvalued relative to their fundamentals.  I did this for perspective.

In this second installment I have broadened my scope looking for attractive dividend growth stocks wherever I can find them.  Later in this article I will present several examples of apparently attractive dividend growth stock research candidates across several sectors and subsectors.  One important aspect of this exercise is to illustrate that the best valuations are primarily limited and available in only a few sectors.  But most importantly, as should be expected in a strong bull market like we have today, the best valuations are generally found in the individual companies and sectors that are currently out-of-favor.  To paraphrase the legendary Warren Buffett, you can’t buy what’s popular and expect to do well.

When conducting my research and screening for attractive dividend growth stock research candidates, my primary focus was on attractive valuation.  However, I was also looking for companies with the most consistent and reliable historical records of earnings and dividend growth.  However, companies with perfectly consistent operating histories are rare.  Therefore, I included a few examples without stellar long-term records, but reasonably attractive records over the past five years or so.  Nevertheless, I did exclude several companies that were technically attractively valued, but in my judgment I did not like the significant inconsistency or cyclicality in their operating histories.

Additionally, I limited my screen to companies offering a current yield of 2% out to a maximum of 5% for traditional companies, but I did include a few REITs with higher yields.  My purpose for limiting the current yield was to avoid the most aggressive high-yield securities such as mortgage REITs, business development companies, royalty trusts and MLPs, because I consider them in a different risk category and therefore not appropriate for this exercise.

A Long-Term Historical Review

With this article I will be presenting numerous examples across all the major sectors and subsectors in the market.  In all cases I will be presenting the longest operating history available to me for each company.  Each example will be presented utilizing the earnings and price correlated F.A.S.T. Graphs™ on each.  Therefore, in order for the reader to get the most benefit from this exercise, it’s imperative that you understand what each of the earnings and price correlated graphs are revealing.

Therefore, I offer the following short tutorial where I take a complete F.A.S.T. Graphs apart and then add one metric at a time.  I will be utilizing the General Dynamics’ graph as my sample .This template will apply to all of the graphics utilized in the article.

The orange line on each graph represents a valuation reference line drawn as a multiple of earnings on each company at a specific P/E ratio.  In theory, this line represents a rational view of a company’s fair value.  The dark green shaded area below the line represents the company’s total earnings over the timeframe graphed.

Next I have added the light green line (it appears white to many) which plots the company’s dividends per share over the timeframe graphed.  A quick examination of this line will tell you whether dividends have been steadily increasing, or whether they have been cut at some point.  The area below the light green line represents the portion of earnings paid out as dividends – commonly referred to as the dividend payout ratio.

Dividends are also expressed after they have been paid out of earnings as a light green shaded area and stacked on top of the orange valuation reference line.  Therefore, dividends are expressed prior to being paid out by the light green (white) line, and after they have been paid out to shareholders expressed as the light green shaded area on top of the orange line.

Next the black line representing monthly closing stock prices is added and correlated with the orange valuation reference line.  Stated overly simplistically, when the price is above the orange line overvaluation is present, when the price is touching the orange line fair valuation is present, and finally, when the price is below the orange line undervaluation is indicated.

The final metric added to the graph is the historical normal P/E ratio represented as a dark blue line.  This calculates the valuation that the market has typically applied to each company over the timeframe graphed.  The dark blue normal P/E ratio line adds a second valuation reference to each graph.  Analysis of both of these valuation reference lines provides the reader an analytical perspective of historical valuation.  (Note: In the case of the General Dynamics’ example, both the orange and blue line converge, however, the blue normal P/E ratio is moderately higher and can be seen in the FAST FACTS boxes to the right of each graph).

In many of the actual examples, these lines will be separated, and the reader can decide for themselves which represents the best valuation reference for each example being examined.  Furthermore, it’s important to note that these lines could change when different timeframes are drawn.  However, for the purposes of this article, each graph is drawn with the maximum timeframe available.

A Sector and Subsector Valuation Review

Before the reader goes beyond this point, I would like to explain that although I have included numerous examples of apparently fairly valued dividend growth stock research candidates in this article, they represent only a very few attractively valued stocks in the context of the whole market.  This was perhaps the most ambitious look at valuation I have ever personally engaged in.  Using the F.A.S.T. Graphs™ screening tool I went through every sector and then every subsector looking for every reasonably valued dividend paying company in the universe comprised of more than 19,000 companies.

What I have presented here represents the very few that I considered reasonably valued enough to be included.  The pickings are indeed very slim in today’s overheated market.  Additionally, I will add that I’ve included names that I personally might never consider as investments in my own portfolio.  However, my purpose was to provide a broad and deep look at valuations in today’s market.  Perhaps many of you will find some companies you like, and like me, see many companies that you would not consider appropriate for your own portfolios.  So to be clear, these are not recommendations, instead, this is a comprehensive review of the current valuations of dividend paying stocks available in today’s generally highly-valued market.

The following examples will be presented on a sector by sector basis.  With each example, it will

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