A great year for dividend growth stocks is one in which there are few dividend cuts and fewer companies that failed to raise their dividends at the expected time. From a valuation standpoint your dividend growth stocks would have out-performed the S&P 500.
When this happens year after year, it is hard to find outstanding values. However, that is not to say they aren't still out there. Of the 250+ stocks I track, 65 (25%) are trading below my calculated fair value. Here are some of the more interesting ones trading at a double digit discount...
Johnson & Johnson (JNJ) is a leader in the pharmaceutical, medical device and consumer products industries.
Fair Value: $115.13 | Recent Price: $99.81 | Yield: 3.0%
The Procter & Gamble Company (PG) is a leading consumer products company that markets household and personal care products in more than 180 countries.
Fair Value: $92.28 | Recent Price: $76.27 | Yield: 3.3%
The Coca-Cola Company (KO) is the world's largest soft drink company, and also has a sizable fruit juice business.
Fair Value: $53.59 | Recent Price: $41.71 | Yield: 3.3%
Cisco Systems, Inc. (CSCO) offers a complete line of routers and switching products that connect and manage communications among local and wide area computer networks employing a variety of protocols.
Fair Value: $36.93 | Recent Price: $28.62 | Yield: 3.0%
Omega Healthcare Investors Inc. (OHI) is a real estate investment trust (REIT) that invests in income-producing healthcare facilities, mainly long-term care facilities located in the United States.
Fair Value: $47.52 | Recent Price: $35.39 | Yield: 6.1%
AT&T Inc. (T) provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless)
Fair Value: $45.69 | Recent Price: $34.74 | Yield: 5.5%
Emerson Electric Co. (EMR) designs and supplies product technology, and delivers engineering services and solutions to a wide range of industrial, commercial and consumer markets around the world.
Fair Value: $66.00 | Recent Price: $50.00 | Yield: 3.7%
Microsoft (MSFT), the world's largest software company, develops PC software, including the Windows operating system and the Office application suite.
Fair Value: $63.01 | Recent Price: $47.40 | Yield: 2.7%
Lockheed Martin Corp. (LMT), the world's largest military weapons manufacturer, is also a significant supplier to NASA and other non-defense government agencies. LMT receives about 93% of its revenues from global defense sales.
Fair Value: $287.49 | Recent Price: $210.48 | Yield: 3.0%
Texas Instruments Inc. (TXN) is one of the world's largest manufacturers of semiconductors, this company also produces scientific calculator products and DLP products for TVs and video projectors.
Fair Value: $69.30 | Recent Price: $52.23 | Yield: 2.8%
Health Care Property Investors, Inc. (HCP) is a California based equity-oriented real estate investment trust that has direct or joint venture investments in health care-related facilities across the U.S.
Fair Value: $53.04 | Recent Price: $37.75 | Yield: 5.9%
Exxon Mobil Corp. (XOM), formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company.
Fair Value: $109.38 | Recent Price: $78.55 | Yield: 3.7%
I calculate Fair Value weighing The Mid-2 Price and the NPV MMA Price. The wieght depends on where we are in the cycle. Currently it is weighted as 25% Mid-2 price + 75% NPV MMA price. The Mid-2 Price considers four fair value calculations, Avg. High Yield Price, 20-Year DCF Price, Avg. P/E Price and Graham Number, the highest and lowest fair values are excluded and the remaining two calculations are averaged to calculate the Mid-2 price. The NPV MMA Price is where the NPV MMA value equals the NPV MMA target.
Needless to say, we need to consider a lot more than just valuation when making a stock purchase. As dividend growth investors, I would argue that dividend fundamentals are more important than valuation. As long-term buy and hold investors, we can over-come paying too much for a great stock with time. However, time is unlikely to help a fairly valued stock with poor dividend fundamentals.
Full Disclosure: Lonh JNJ, PG, KO, CSCO, T, EMR, MSFT, LMT, TXN, HCP, XOM in my Dividend Growth Portfolio, and long OHI in my High-Yield Portfolio. See a list of all my dividend growth holdings here.
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- 5 Lessons Learned About Investing In Dividend Growth Stocks
- 6 High-Yielding Mega-Cap Stocks
- Dividend Investors Should Focus On Stocks, Not The Market
- The Secret Ingredient of Dividend Growth Stocks
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