12 Attractive Fast-Growing Dividend Growth Stocks For High Total Return by Chuck Carnevale, F.A.S.T. Graphs


The current market environment is presenting many challenges to the conservative retired investor in need of current income.  Interest rates are near all-time lows and the valuations of many blue-chip dividend growth stocks have become extended.  Consequently, it is becoming very difficult to find quality investment opportunities that can provide safety through sound valuation, attractive yield and the potential to fight inflation.

Most of my recent work has been focused on presenting attractively valued, high quality, higher yielding dividend growth stocks for consideration by retired investors. Consequently, my primary focus has been on above-average yield, safety and dividend growth.  Stated more plainly, my objective was to present high quality income and income growth investments over total return investments.

Considering today’s low yield interest rate environment, my yield focus has been plus or minus 3% or better.  For safety, I have been focusing on fair valuation as a function of earnings yield (the inverse of the P/E ratio).  And for dividend growth a significant portion of my dividend growth offerings have been Dividend Champions or Dividend Contenders from David Fish’s CCC lists.  These are companies that have consecutively grown their dividends for 10 to 25 years or longer.

However, it recently came to my attention that I have been neglecting “newer” investors that are planning for retirement but not yet in retirement.  A young 37-year-old regular reader posted a comment on my recent article series where I covered 20 higher-yielding blue-chip dividend growth stocks found here  and Part 2 found here .  The following excerpt from his comment is what inspired me to write this article:

“I thought it would be very cool if you could do one more articles with 10 dividend growth stocks with slightly lower yields that have a little more room for growth for some of us “newer” investors. Perhaps, stocks that have strong dividend growth rates and higher revenue growth but still sport a yield somewhere between 1.6% to 2.6% (like GILD and AAPL) for example. I’m not sure if this is something you would consider, but thought I would at least throw it out there.”

Personally, I felt this was a reasonable request and I began running screens on dividend growth stocks that were fairly valued and offered above-average earnings and dividend growth potential.  Frankly, I will admit to being shocked at how difficult it was to find faster growing dividend growth stocks of reasonable quality that were also attractively valued.

Cheaper by the Dozen

My quest to find 10 faster growing dividend stocks that were also attractively valued proved challenging.  As I screened the universe, I did come up with just over 30 stocks that I initially found attractive based solely on valuation.  However, as I begin looking for above-average earnings growth, my choices dwindled rapidly.  Nevertheless, my screens produced 12 stocks that I felt met the above reader’s requirements, and more importantly, that also met some important considerations of my own.

If I had based my screens solely on fair or undervaluation, there were numerous research candidates to choose from.  Unfortunately, many of them were too cyclical for my taste, and others represented more speculative turnaround situations.  I did not feel comfortable presenting any of those.

Therefore, I only included companies that met some of my own personal investment philosophies in addition to attractive valuation.  For starters, I prefer companies that have produced consistent above-average historical earnings growth and dividend growth.

However, I do not extrapolate past growth into the future.  Instead, my initial focus on historical operating results is designed to provide me comfort that the business I am reviewing has a proven record of effectively competing in its industry.  Additionally, a review of historical operating performance provides me some insights into the competency of the company’s management team.

With this in mind, I only included research candidates that have consistently produced above-average historical earnings growth over the past 5 to 7 years.  I was a little more lenient with dividend growth, because some of the research candidates I found have only been paying dividends for a few years.  On the other hand, I did require that each company provided a history of annual dividend increases.

As regular readers of my work will attest, each of the following research candidates had to appear attractively valued to be included.  I calculate fair valuation based on the F.A.S.T. Graphs™ research tools implementation of widely-accepted formulas for valuing a business.  These are what produce the orange valuation reference lines on each graph.

It’s important to point out, that these are theoretical valuation reference lines that provide the opportunity to analyze how the market has historically valued a given business.  Consequently, I also evaluate and analyze the historically normal P/E ratio valuation that the market has applied to each company (this is the dark blue line on the graphs).

In order to be conservative, I will base my valuation decisions on the lower of the two valuation references.  After I have reviewed history, I then turn my attention to evaluating the future potential of each company.  However, I apply the same valuation logic to forecast calculations that I do with the historical data.

Therefore, readers should note that forecasting calculations provided will be based on either the historical orange formulaic valuation reference line, or the dark blue normal P/E ratio valuation reference line as appropriate.  Stated more plainly, provided forecast return calculations will be presented based on the most conservative valuation reference.

This process generated the following 12 above-average growing dividend growth stocks that appear attractively valued in today’s market environment.  The following portfolio review lists them in alphabetical order and provides a summary of some of the key fundamental metrics I was screening for.  However, I want to be clear that these are not offered as a recommendation of 12 stocks to build a portfolio with.  Instead, each research candidate is offered so that the reader can pick and choose any, none, or all of the candidates that meet their own unique goals and objectives.

Dividend Growth Stocks

The 12 Candidates Through The Lens Of Historical And Forecast Calculators from F.A.S.T. Graphs

The following review of each individual candidate provides significant fundamental research on each selection. First, I have provided a short business description on each company courtesy of S&P Capital IQ.  Next, I offer the historical earnings and price correlated graph followed by the associated performance on each research candidate over the timeframe graphed. Finally, I provide two forecasting calculators, one short to midterm and one longer-term forecast calculator.

It’s important to note that S&P Capital IQ provides two separate sets of forecasts.  The short to midterm calculator is based on the consensus of leading analysts’ forecasts for the next 2 to 3 forward years.  The number of analysts providing the forecast for each year is provided at the bottom of the graph.  The second earnings forecast calculator is based on a long-term (3 to 5 year) trend line forecast. The number of analysts providing the long-term forecast is found in the FAST FACTS box to the right of the graph.

Apple Inc. (AAPL)

Short Business Description Courtesy Capital IQ:

“Apple Inc. designs, manufactures, and markets mobile

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