Dividends add a tremendous amount of confidence when looking for value companies. Large Cap Stocks with consistently growing dividends, when reinvested regularly, can turn into a high yield to cost compounding machines that has potential to create significant wealth over the years. A great valuation can increase this potential many fold.
This screen looks for large cap stocks over $5 Billion in market capitalization paying dividends. We want the dividend to be growing, looking back at least 5 years, and the business fundamentals also improving so the company is likely to sustain dividend growth in the future. Screen criteria is as follows:
- Dividend Yield > 1.5% and < 3.75%
- Dividend 1 Year Change > 8%
- Dividend 3 Year Avg Growth > 8%
- Dividend 5 Year Avg Growth > 8%
- EPS 5 Year Avg Growth > 8%
- Payout Ratio < 40% and > 10%
- Sales 5 Year Avg Growth > 4%
The Screen Results
div 5Yr Avg Growth
eps 5yr avg growth
American Financial Group
Booz Allen Hamilton
Dick's Sporting Goods
Huntington Ingalls Industries
Nexstar Media Group
T. Rowe Price Group
Notes and Observations
From this list, AFG, ALL, NOC and TROW have grown their dividends for 10+ year consistently.
From a valuation perspective, ALL, TROW, NXST, NOC and DKS look interesting. NXST may be a little speculative with poor Altman Z score. I will be reviewing ALL, TROW and NOC further for our Dividend Portfolio as they offer a good mix of dividend growth and good value.
Here we are coming at the valuation after we have screened for dividend growth. In practice, this may not give us the best value stocks, but it will certainly give us stocks that can create value from compounding dividends for long time (assuming the management continues their track record of growing dividends). Of the 10 stocks we have 3 stock to review after we apply the valuation filter. If valuations are not a concern for you and you are a dividend growth type investor, any of these stocks will fit the bill for you.