My very specific goal with this particular account is to create a dependable, future income stream with dividend growth companies as the foundation. The problem I have is just how slow of a process this has been. I started this little project a long time ago, but I have, at least twice, raided the account for reasons I can’t even being to remember right now (although I am sure if I searched my archives from my old site I could find out what happened), and at least once (beginning of Covid, March 2020) took a really nice chunk out of gains with naked puts. Nonetheless, I truck on trying to avoid previous mistakes.

Main Screen – Dividend Stocks with 20+ Years of Dividend Growth

First and foremost, I want companies that have dividend growth in their DNA. As such, I use the Dividend Champion (25+yrs) and part of the Dividend Contenders List (20+ Years). While the number will change month to month it should be unusually stable as companies don’t often drop off (and to get on they would have had to started while Bush was President, and survived the bubble, 2007 – 2009 and the first phase of COVID).

This provides me with 167 companies that have increased their dividend for the past 20 years (last month it was 167).

Metric Screens

Once I have those companies I can screen them for particular metrics. Please review my larger discussion on screening for undervalued dividend growth stocks for definitions and thoughts on each:

  • Company has to have a P/E under 20;
  • A Dividend Yield of over 2%;
  • Payout Ratio under 50%; and
  • Positive EPS Growth for the past 5 years.

Using FinViz, out of the thousands of stocks that trade on the US markets I was left with 225, that I had to cross-reference with my list above. For what it is worth, last month there was over 250 that survived the above screen. My guess? is that as the market has screamed upwards some dropped off the list because their P/E went too high while their dividend yield dropped.

My January 2021 Dividend Screen Watch List

Cross-referencing the two lists I was left with the following 20 companies:

AFLAflac IncorporatedFinancialInsurance – Life
AROWArrow Financial CorporationFinancialBanks – Regional
ATOAtmos Energy CorporationUtilitiesUtilities – Regulated Gas
CINFCincinnati Financial CorporationFinancialInsurance – Property & Casualty
CTBICommunity Trust Bancorp, Inc.FinancialBanks – Regional
EBTCEnterprise Bancorp, Inc.FinancialBanks – Regional
FLICThe First of Long Island CorporationFinancialBanks – Regional
GDGeneral Dynamics CorporationIndustrialsAerospace & Defense
MDUMDU Resources Group, Inc.Basic MaterialsBuilding Materials
MGRCMcGrath RentCorpIndustrialsRental & Leasing Services
NCNACCO Industries, Inc.EnergyThermal Coal
SRCE1st Source CorporationFinancialBanks – Regional
TDSTelephone and Data Systems, Inc.Communication ServicesTelecom Services
THFFFirst Financial CorporationFinancialBanks – Regional
TMPTompkins Financial CorporationFinancialBanks – Regional
TROWT. Rowe Price Group, Inc.FinancialAsset Management
CATCCambridge BancorpFinancialBanks – Regional
RBCAARepublic Bancorp, Inc.FinancialBanks – Regional
PBProsperity Bancshares, Inc.FinancialBanks – Regional
SJMThe J. M. Smucker CompanyConsumer DefensivePackaged Foods

I have had an aversion to regional banks recently, something in my gut tells me they are in trouble despite their low P/Es across the board. I do not live in the sector (or any sector for that matter), but something seems amiss to me when people all over the country are having trouble paying bills, and the bank can’t charge interest rates, and are getting crushed by the fact that people can really bank anywhere in the country at this point. For example, is it really a big deal if “my” bank is in Missouri or if it is here on Long Island (a FLIC branch is in walking distance to my house). I have a similarly uneasy feeling with regard to other financials. I am aware that these feelings may be a screaming reason to buy, but not this month. If I still am seeing the same thing in a month or two I am going to have to bite the bullet, but not right now.

Removing financials (and utilities/energy), I am left with the following companies:

GDGeneral Dynamics CorporationIndustrialsAerospace & Defense
MDUMDU Resources Group, Inc.Basic MaterialsBuilding Materials
MGRCMcGrath RentCorpIndustrialsRental & Leasing Services
TDSTelephone and Data Systems, Inc.Communication ServicesTelecom Services
SJMThe J. M. Smucker CompanyConsumer DefensivePackaged Foods

Currently, I have small positions in GD, MGRC and SJM. I am going to add to those positions at some time over the next month to 6 weeks on a day down in the market.

My December 2020 Purchase

Interestingly, last month I was left with the exact same companies after screening, and again, I was left with the same exact stocks and came to the same conclusion based on the same reasoning:

As was the case last month, I don’t have a particular appetite for banks, financial companies and insurance companies. I just don’t know if we have a second resurgence of COVID what that may do to those 3 industries in particular

  • General Dynamics
  • McGrath Rental Corp
  • MDU Resources Group
  • JM Smucker
  • Telephone & Data Sys

If nothing else, at least I am consistent. Notwithstanding, if the same thing happens next month I am going to have to at least consider doing a deeper dive into regional banks.