I have been out of regularly investing in dividend growth stocks since March (i.e. Covid and the world went to shit), but with the creation of this site. I am excited to get back into it. Every month around the 15th, I will screen for undervalued dividend growth stocks using the metrics described below (or an updated version of it), and then share my purchase.
Main Screen – Dividend Stocks with 20+ Years of Dividend Growth
First and foremost, I want companies that have dividend growth in their DNA. Does this guarantee future growth? Of course not, but it does allow some basis to hope that the board continues to believe in rewarding shareholders in the same manner. I use the Dividend Champion and part of the Dividend Contenders List.
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 start while Bush was President, and survived the dot.com bubble, 2007 – 2009 and the first phase of COVID.
This month the amount of companies 165.
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.
On November 16, 2020 this screen provided me with 259 Stocks. Now to cross reference the two lists.
Combining the Two Screens to Create a Watch List
When we combine the two screens I am left with 23 companies to take a deeper dive into:
| Company Name | Symbol |
| AFLAC Inc. | AFL |
| Arrow Financial Corp. | AROW |
| Atmos Energy | ATO |
| BancFirst Corp. OK | BANF |
| Cincinnati Financial | CINF |
| Community Trust Banc. | CTBI |
| Dover Corp. | DOV |
| Enterprise Bancorp Inc. | EBTC |
| First of Long Island Corp. | FLIC |
| General Dynamics | GD |
| McGrath Rentcorp | MGRC |
| MDU Resources | MDU |
| NACCO Industries | NC |
| 1st Source Corp. | SRCE |
| Telephone & Data Sys. | TDS |
| First Financial Corp. | THFF |
| Tompkins Financial Corp. | TMP |
| T. Rowe Price Group | TROW |
| Eagle Bancorp Montana Inc. | EBMT |
| Cambridge Bancorp | CATC |
| Republic Bancorp KY | RBCAA |
| Prosperity Bancshares | PB |
| J.M. Smucker Co. | SJM |
Not feeling great about local banks, insurance and energy which eliminates a ton of the list. It isn’t that those aren’t a great business to buy today since I am sure I am not the only one who doesn’t feel great about those industries, however, if I am going to make an investment today, I would have to do a ton more research into each of the companies within those industries. That leaves me with:
- Telephone & Data Sys – Telephone and Data Systems, Inc. is a diversified telecommunications company. The Company is engaged in conducting its Wireless operations through its subsidiary, United States Cellular Corporation (U.S. Cellular), as well as providing its wireline services, cable services, and hosted and managed services (HMS), through its subsidiary, TDS Telecommunications Corporation (TDS Telecom). It operates through four business segments: U.S. Cellular, Wireline, Cable, and Hosted and Managed Services. U.S. Cellular provides service to postpaid and prepaid customers. Wireline operations provide retail telecommunications services to both residential and commercial customers. Wireline offers services, including broadband, video, voice and network access services. Cable offers broadband, video and voice services under TDS and BendBroadband brand names. It provides a range of information technology (IT) services, including colocation, and cloud and hosting solutions through its HMS business.
- McGrath Rent Corp – McGrath RentCorp is a diversified business-to-business rental company. The Company operates through four business segments: modular building and portable storage segment (Mobile Modular); electronic test equipment segment (TRS-RenTelco); a subsidiary providing containment solutions for the storage of hazardous and non-hazardous liquids and solids segment (Adler Tanks), and a subsidiary classroom manufacturing business selling modular buildings used primarily as classrooms in California (Enviroplex). The Mobile Modular business segment includes Mobile Modular Portable Storage division. As of December 31, 2016, the Company’s TRS-RenTelco rented and sold electronic test equipment nationally and internationally from three facilities located in Grapevine, Texas (the Dallas facility), Dollard-des-Ormeaux, Canada (the Montreal facility) and Bangalore, Karnataka, India (the Bangalore facility). Adler Tanks purchases tanks and boxes from various manufacturers located throughout the country.
- General Dynamics – General Dynamics Corporation is a global aerospace and defense company. The Company offers a portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; information technology (IT) services and C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) solutions, and shipbuilding and ship repair. It operates through four business groups: Aerospace, Combat Systems, Information Systems and Technology, and Marine Systems. Its Aerospace group offers aircraft design; cockpit and cabin systems, and product service and support. Its Combat Systems group offers combat vehicles, weapons systems and munitions. The Information Systems and Technology group provides technologies, products and services in support of various programs. The Marine Systems group is a designer and builder of nuclear-powered submarines, surface combatants and auxiliary and combat-logistics ships.
- J M Smucker – The J. M. Smucker Company is engaged in manufacturing and marketing of food and beverage products. The Company’s segments include U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Away From Home. Its products include coffee, dog food, cat food, pet snacks, peanut butter, fruit spreads, frozen handheld products, shortening and oils, portion control products, juices and beverages, and baking mixes and ingredients. The U.S. Retail Pet Foods segment includes Rachael Ray Nutrish, Meow Mix, Milk-Bone, Kibbles ‘n Bits, 9Lives, Natural Balance, Nature’s Recipe, and Pup-Peroni branded products. The U.S. Retail Coffee segment includes Folgers, Dunkin’, and Cafe Bustelo branded coffee. The U.S. Retail Consumer Foods segment includes Smucker’s, Jif, and Crisco branded products. International and Away From Home segment offers brands, such as Folgers and Smucker’s.
- Dover – Dover Corporation is a diversified global manufacturer, delivering equipment and components, specialty systems, consumable supplies, software and digital solutions and support services. The Company operates through five segments: Engineered Products, Fueling Solutions, Imaging & Identification, Pumps & Process Solutions, and Refrigeration & Food Equipment. Engineered Products segment is a provider of a range of products, software and services that have customer applications across several markets, including aftermarket vehicle service, solid waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing. Fueling Solutions segment provides components, equipment and software and service solutions enabling transport of fuels and other hazardous fluids along the supply chain, as well as operation of retail fueling, and vehicle wash establishments
I am looking to invest $500 to $1,000 this month (this amount will change monthly), so I am going to invest equal weight to 4 of the 5 picks above (going to leave TDS off, because I just don’t know how they compete there vs being completely absent in the NY market).
*Research was done on November 16, 2020
