Saturday, April 4, 2015

My favorite dividend growth stocks

While most investors look at the price action of stocks, I like to look at the historical earnings and dividend payments of stocks. A company's health is usually reflected by the earnings growth (companies who utilize financial engineering may skew results). Higher earnings usually translate to higher dividend payouts. These two in combination usually translate to higher share prices. In the end, owning a business that can continuously increase earnings will make an investor very wealthy.

Although past results are not a good way to predict future results, it is interesting to see how management has performed in the past and how capable the company is in handling recessions. Those investing now have the traumatic records from 2008-2009 to look over.

Below is a list of charts of my favorite dividend growth companies. This is not a list to tell investors to buy these stocks now. Some of these stocks are not of good value at the moment. If these stocks can be bought for a good value, they will likely be good additions to anyone's portfolio. One might notice that the majority of these companies are of the Consumer Staples classification. This tells us investors something: that the companies that have growing earnings and dividends, even during recessions, are the ones that sell products that every person needs no matter the economic situation. Recession, what recession? Looking at these graphs, one would be crazy to think that there was a recession in 2008-2009 since many of these companies had in fact both growing earnings and dividends. These companies have survived through decades of harsh environmental climates. Financial institution collapse, housing bubble, tech bubble euphoria, SARS virus panic, harsh currency exchanges, terrorist attacks, Anthrax bioweapon scare, rising interest rates, etc... you name it. They've seen it.

Note that some companies have more linear dividend growth graphs whereas some have more exponential. The exponential charts are the most impressive. It indicates that the company continuously increases their dividends by the similar rate. This over time will follow an exponential function. A decreasing dividend growth every year will reduce the power of exponential growth, and it will eventually look more linear. The companies picked here all have consistent earnings and consistent dividend growth.

These companies are not sexy. They are not the next Tesla or Facebook. They are predictable. They are boring. They sell things people wouldn't get giddy over. Two graphs are shown below for each company. The orange line shows earnings. The blue graph shows dividend payments. FastGraphs are utilized here for earnings charts.
(Click the graphs for enlarged version)

#1 MO / KRFT / PM: The best stock of all time. MO has spun off KRFT and PM, both of which pay very high growing dividends. An investor will be very wealthy having invested in MO in the past.

#2 JNJ - Near linear earnings growth and extremely consistent dividend payout increases.

#3 CL - Near perfect linear earnings growth. Liftoff dividend payments.

#4 MKC - Near perfect linear earnings growth. What recession? Dividend growth :yawn: predictable. I'll continue sprinkling my McCormick seasoning on my chicken dinners.

#5 PEP - Snack and beverage company. Predictable growth and exponential dividend liftoff.

#6 PG - The earnings growth is choppier here but the dividend history is exceptional.

#7 UTX - UTX and MMM are my favorite industrial stocks. Predictable earnings growth and dividend growth. I included UTX here instead of MMM since I do not own MMM yet :)

#8 GIS - GIS has frozen their dividend in the past. This is one of those companies where a freeze in the dividend does not warrant a sell. Their earnings have been nothing short of consistent.

#9 KO - No need to introduce what KO is. Definately not the fastest growing company, but the dividend growth has been legendary.

#10 ABT / ABBV - ABT spun off ABBV several years ago. Their earnings are boring, slow, but steady. The dividends are similar to JNJ. Nearly perfect. I aim to hold both ABT and ABBV in my portfolio one day.


  1. Thanks for the Top 10 list! I wish I had access to fast graphs but I'm too cheap (frugal) to pay for it. For #6 it looks like you posted Pepsi's chart again and the Pepsi div growth chart looks like you posted PG's chart.

    1. Thanks for the catch! I'll fix it right away. FastGraphs is great if you're ok with paying for the monthly subscription. I highly recommend it to others.

  2. Thanks for sharing this list and their respective graphs. You can quickly glance at each of the graphs and see why these companies are long term holds in many portfolios. They may look 'boring' per se, but they are making your bank account look sexy!