As a Dividend Growth Investor I'm always searching for companies that can consistently grow their dividends year after year after year. They're the kind of companies that will produce more and more income as the years go by. That kind of income is extremely beneficial to any investor that wants a comfortable retirement one day. It's also the kind of income that can be passed down from generation to generation. And I believe that's the goal of most investors.
A lot of these types of companies are pretty well known by most investors. As a consequence they generally have a lot of followers and they're often overbought or overpriced. That doesn't make them bad investments, just expensive investments. And while I'd love to own those companies simply because of their consistent dividend growth, I'll only consider them when they're inexpensive to buy.
Some investors tend to look at a stock's P/E ratio and some investors look at a stock's PEG (both can be found below) when they're trying to determine if a stock is cheap. I've found both methods to be excellent selection techniques, but both methods are looking backwards. There's one more method that I often use in addition to those two which is a method that looks at future estimates, and that's the difference between the current selling price and the analyst's estimated one year price target for the stock.
The following chart contains a list of a dozen companies that have excellent double digit dividend growth rates as well as one year estimated capital gains expectations of ten percent or better. Together I calculate a one year estimated return on invested capital for each stock. This result will give me an estimate of my increase in wealth over the next 12 months. It's a good estimate to know!
A lot of these types of companies are pretty well known by most investors. As a consequence they generally have a lot of followers and they're often overbought or overpriced. That doesn't make them bad investments, just expensive investments. And while I'd love to own those companies simply because of their consistent dividend growth, I'll only consider them when they're inexpensive to buy.
Some investors tend to look at a stock's P/E ratio and some investors look at a stock's PEG (both can be found below) when they're trying to determine if a stock is cheap. I've found both methods to be excellent selection techniques, but both methods are looking backwards. There's one more method that I often use in addition to those two which is a method that looks at future estimates, and that's the difference between the current selling price and the analyst's estimated one year price target for the stock.
The following chart contains a list of a dozen companies that have excellent double digit dividend growth rates as well as one year estimated capital gains expectations of ten percent or better. Together I calculate a one year estimated return on invested capital for each stock. This result will give me an estimate of my increase in wealth over the next 12 months. It's a good estimate to know!
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In this article I'll look at the second half dozen companies on the list above. For information on the first half dozen please read the previous article "A Half Dozen Great Ideas". For each company I'll lay out a company description, some basic fundamentals and some convenient links. Hopefully this information will assist other dividend growth investors in deciding if any of these companies fits their individual investing strategy.
7. Prudential Financial, Inc. provides insurance, investment management, and other financial products and services to individual and institutional customers in the United States and internationally. The company principally offers life insurance, annuities, retirement-related services, mutual funds, and investment management products. Its U.S. Retirement Solutions and Investment Management division offers individual variable and fixed annuity products; recordkeeping, plan administration, actuarial advisory, tailored participant education and communication, trustee, and institutional and retail investments services; and guaranteed investment contracts, funding agreements, institutional and retail notes, structured settlement annuities, and other group annuities. This division also provides investment management and advisory services to the public and private marketplace. The company's U.S. Individual Life and Group Insurance division provides individual variable life, term life, and universal life insurance products to mass middle, mass affluent, and affluent markets; group life; long-term and short-term group disability; and group corporate, bank, and trust-owned life insurance products to institutional clients. This division also sells accidental death and dismemberment and other ancillary coverage, as well as provides plan administrative services. Prudential Financial, Inc.'s International Insurance division provides individual life insurance, retirement, and related products. The company serves its customers through third-party broker-dealers, dependent financial planners, third-party financial advisors, brokers, benefits consultants, wirehouses, banks, general agencies, producer groups, life planners, and life consultants. Prudential Financial, Inc. was founded in 1875 and is headquartered in Newark, New Jersey. (Summary) (Company) (Daily Chart)
| 22 March 2015 Price $82.68 1yr Target $95.63 Analysts 16 1yr Cap Gain 15.66% Dividend $2.32 Yield 2.80% 1yr Est Tot Return 18.46% 3yr DivGR 14.23% 5yr DivGR 25.39% P/E 29.53 PEG 2.68 | Market Cap $37.54 Bil Beta 1.60 EPS (ttm) $2.80 Payout Ratio 82.85% EPS next yr $10.32 Forward P/E 8.01 Debt/Equity 0.71 ROA 0.20% ROE 3.40% ROI 2.00% Sales $54.16 Bil Income $1.36 Bil Profit Margin 2.51% |
8. Reliance Steel & Aluminum Co. operates as a metals service center company. The company provides metals processing services and distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium, and specialty steel products. Its principal processing services comprise cutting, leveling, sawing, machining, and electro polishing. The company also fabricates and distributes structural steel components and parts; provides metal components and inventory management services; and distributes special alloy steel bar and heavy-wall tubing products to oil and gas industries, as well as offers aluminum bronze and cut to size materials. In addition, it provides a range of metal perforating and fabrication services; distributes aerospace metals; and offers alloy, carbon, and stainless steel bar and plate products. Reliance Steel & Aluminum Co. serves general manufacturing, non-residential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, heavy industry, and related industries. The company sells its products to OEM customers, small machine shops, and fabricators. As of February 19, 2015, it operated through a network of metals service centers in approximately 300 locations in 39 states in the United States, as well as in Australia, Belgium, Canada, China, France, Malaysia, Mexico, Singapore, South Korea, Turkey, the United Arab Emirates, and the United Kingdom. The company was founded in 1939 and is headquartered in Los Angeles, California. (Summary) (Company) (Daily Chart)
| 22 March 2015 Price $59.49 1yr Target $65.60 Analysts 10 1yr Cap Gain 10.27% Dividend $1.60 Yield 2.68% 1yr Est Tot Return 12.95% 3yr DivGR 29.47% 5yr DivGR 21.29% P/E 12.58 PEG 1.32 | Market Cap $4.61 Bil Beta 1.73 EPS (ttm) $4.73 Payout Ratio 33.82% EPS next yr $5.50 Forward P/E 10.81 Debt/Equity 0.57 ROA 4.80% ROE 9.20% ROI 7.00% Sales $10.45 Bil Income $371.50 Mil Profit Margin 3.55% |
9. Union Pacific Corporation, through its subsidiary, Union Pacific Railroad Company, operates railroads in the United States. The company offers freight transportation services for agricultural products, including grains, commodities produced from grains, and food and beverage products; automotive products, such as finished vehicles and automotive parts; and chemicals consisting of industrial chemicals, plastics, crude oil, liquid petroleum gases, fertilizers, soda ash, sodium products, and phosphorus rock and sulfur products. It also provides transportation services for coal and petroleum coke; industrial products comprising construction products, minerals, consumer goods, metals, lumber, paper, and other miscellaneous products; and intermodal import and export containers and trailers. Its rail network includes 31,974 route miles linking the Pacific Coast and Gulf Coast ports with the Midwest and eastern United States gateways. Union Pacific Corporation was founded in 1862 and is headquartered in Omaha, Nebraska. (Summary) (Company) (Daily Chart)
| 22 March 2015 Price $117.45 1yr Target $131.79 Analysts 28 1yr Cap Gain 12.20% Dividend $2.20 Yield 1.87% 1yr Est Tot Return 14.07% 3yr DivGR 25.48% 5yr DivGR 28.74% P/E 20.43 PEG 1.49 | Market Cap $103.51 Bil Beta 0.92 EPS (ttm) $5.75 Payout Ratio 38.26% EPS next yr $7.47 Forward P/E 15.72 Debt/Equity 0.54 ROA 10.00% ROE 24.20% ROI 17.20% Sales $23.99 Bil Income $5.18 Bil Profit Margin 21.59% |
10. Unum Group, together with its subsidiaries, provides group and individual disability insurance products in the United States and the United Kingdom. The company operates through three segments: Unum US, Unum UK, and Colonial Life. It provides group long-term and short-term disability, group life, accidental death and dismemberment, individual disability, supplemental and voluntary products, and group and individual long-term care insurance products, as well as accident, sickness and disability products, life products, and cancer and critical illness products. The company also offers group pension, individual life and corporate-owned life insurance, reinsurance pools and management operations, and other product lines. In addition, it provides a portfolio of other insurance products, including life insurance, employer- and employee-paid group benefits, and other related services. The company markets its products primarily to employers interested in providing benefits to their employees. It sells its products through field sales personnel, independent brokers, and consultants, as well as independent contractor agency sales force. Unum Group was founded in 1848 and is based in Chattanooga, Tennessee. (Summary) (Company) (Daily Chart)
| 22 March 2015 Price $34.02 1yr Target $37.88 Analysts 17 1yr Cap Gain 11.34% Dividend $0.66 Yield 1.94% 1yr Est Tot Return 13.28% 3yr DivGR 16,77% 5yr DivGR 14.86% P/E 21.53 PEG 3.59 | Market Cap $8.55 Bil Beta 1.38 EPS (ttm) $1.58 Payout Ratio 41.77% EPS next yr $3.94 Forward P/E 8.63 Debt/Equity 0.33 ROA 0.70% ROE 4.60% ROI 5.10% Sales $10.52 Bil Income $413.40 Mil Profit Margin 4.02% |
11. Valero Energy Corporation operates as an independent petroleum refining and marketing company in the United States, Canada, the Caribbean, the United Kingdom, and Ireland. It operates through two segments, Refining and Ethanol. The Refining segment is involved in refining, wholesale marketing, product supply and distribution, and transportation operations. This segment produces conventional and premium gasolines, gasoline meeting the specifications of the California Air Resources Board (CARB), reformulated gasoline blendstock for oxygenate blending, diesel fuels, low-sulfur and ultra-low-sulfur diesel fuels, CARB diesel fuel, distillates, jet fuels, asphalts, petrochemicals, lubricants, and other refined products. The Ethanol segment produces and sells ethanol and distillers grains. The company markets its refined products through bulk and rack marketing network; and through approximately 7,400 outlets under the Valero, Diamond Shamrock, Shamrock, Ultramar, Beacon, Texaco, and other names. As of December 31, 2014, it owned 15 petroleum refineries with a combined throughput capacity of approximately2.9 million barrels per day. Valero Energy Corporation also owns and operates 11 ethanol plants with a combined ethanol production capacity of approximately 1.3 billion gallons per year. The company was formerly known as Valero Refining and Marketing Company and changed its name to Valero Energy Corporation in August 1997. Valero Energy Corporation was founded in 1955 and is based in San Antonio, Texas. (Summary) (Company) (Daily Chart)
| 22 March 2015 Price $61.55 1yr Target $69.23 Analysts 13 1yr Cap Gain 12.47% Dividend $1.60 Yield 2.60% 1yr Est Tot Return 15.07% 3yr DivGR 46.15% 5yr DivGR 29.45% P/E 8.82 PEG 1.82 | Market Cap $31.69 Bil Beta 1.91 EPS (ttm) $6.98 Payout Ratio 22.92% EPS next yr $5.95 Forward P/E 10.35 Debt/Equity 0.31 ROA 7.70% ROE 17.8% ROI 15.20% Sales $130.84 Bil Income $3.69 Bil Profit Margin 2.82% |
12. The Williams Companies, Inc. operates as an energy infrastructure company primarily in the United States. The company operates in three segments: Williams Partners, Access Midstream, and Williams NGL & Petchem Services. It owns and operates natural gas pipeline system extending from Texas, Louisiana, Mississippi, and the offshore Gulf of Mexico through Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, and New Jersey to the New York City metropolitan area. The company also owns and operates a natural gas pipeline system extending from the San Juan basin in Northwestern New Mexico and Southwestern Colorado through Colorado, Utah, Wyoming, Idaho, Oregon, and Washington to a point on the Canadian border near Sumas, Washington; gulfstream natural gas pipeline system extending from the Mobile Bay area in Alabama to markets in Florida; and constitution pipeline that connects its gathering system in Susquehanna County, Pennsylvania to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New York. In addition, it gathers, treats, and processes natural gas and natural gas liquids; and offers deepwater production handling and crude oil transportation services, as well as transports and stores natural gas to local natural gas distribution companies, municipal utilities, direct industrial users, electric power generators, and natural gas marketers and producers. Further, the company gathers, fractionates, treats, stores, and sells ethane/ethylene, propane, propylene, normal butane, isobutane/butylene, and condensate. As of December 31, 2014, it owned and operated approximately 13,600 miles of pipelines; and approximately 1,096 miles of NGL pipelines. The company was founded in 1908 and is headquartered in Tulsa, Oklahoma. (Summary) (Company) (Daily Chart)
| 22 March 2015 Price $48.28 1yr Target $54.50 Analysts 14 1yr Cap Gain 12.88% Dividend $2.32 Yield 4.80% 1yr Est Tot Return 17.68% 3yr DivGR 44.43% 5yr DivGR 40.19% P/E 17.06 PEG 0.95 | Market Cap $36.11 Bil Beta 1.37 EPS (ttm) $2.83 Payout Ratio 81.97% EPS next yr $1.31 Forward P/E 36.77 Debt/Equity 2.47 ROA 5.20% ROE 27.8% ROI 1.10% Sales $7.64 Bil Income $2.11 Bil Profit Margin 27.61% |
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