Dividend growth stocks are so 2011.\u00a0 Yesterday, a portfolio manager was interviewed on CNBC.<\/p>\n
“What are you recommending?”<\/p>\n
” We like high quality dividend growth stocks.”<\/p>\n
“Everyone says that.”<\/p>\n
Sometimes, “everyone” is not wrong.\u00a0\u00a0Perhaps because equities are generally out of favor, with net outflows of money from domestic equity funds,\u00a0this popular investment theme is still reasonably valued, more than three years after we started to write about it.\u00a0 We took a list of\u00a025 high-quality dividend growth stocks,\u00a0with average dividend yields of 3.1%, and compared them with the S&P 500.\u00a0 Their average PE on trailing twelve month EPS\u00a0was\u00a015.18x,\u00a0or a\u00a013% premium to the S&P 500 trading at 13.42x.\u00a0 This is a very modest premium<\/strong> considering that\u00a0these companies have above-average dividend yields, profitability, free cash flow\u00a0and\u00a0EPS growth, as well as superior stock price stability due to yield\u00a0 support.\u00a0 Furthermore, their PE\u00a0premium has climbed only marginally<\/strong> since mid-February, from 10% to 13%.<\/p>\n So, yes, at this point dividend growth is an overaly familiar theme that puts the guys and\u00a0gals on CNBC to sleep.\u00a0But many dividend growth stocks are still reasonably valued and a good choice for investors who need yield as well as growth.\u00a0\u00a0The high-yield equities that do<\/strong> look expensive\u00a0are\u00a0“bond substitutes” such as telecom, utilities, and\u00a0tobaccos, although some of them may well continue to be good investments.<\/p>\n Of course,\u00a0it is not easy to\u00a0identify good dividend growth stocks<\/strong>, because\u00a0many companies fail to grow as rapidly as Wall Street expects.\u00a0 Many “growth stocks” turn out to be duds.\u00a0 Consult your financial advisor,\u00a0preferably one\u00a0who is supported by a first-class equity research department.<\/p>\n","protected":false},"excerpt":{"rendered":" Dividend growth stocks are so 2011.\u00a0 Yesterday, a portfolio manager was interviewed on CNBC. “What are you recommending?” ” We like high quality dividend growth stocks.” “Everyone says that.” Sometimes, “everyone” is not wrong.\u00a0\u00a0Perhaps because equities are generally out of … Continue reading