7 Underrated Stocks for Your Dividend Growth Portfolio
Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Note: This article originally made an erroneous reference to ConocoPhillips current stock price. That error has been corrected.
With a lot of investor focus shifting to income reliance as well as growth potential, dividend-paying stocks have been getting a far greater share of attention lately than they used to. Offering a measure of safety along with
In order to make it through my initial screening, these stocks must have an extensive history of paying and raising dividends in a consistent manner. These seven all sport a current yield of greater than 2.5%, a history of consistently paying and raising dividends of more than ten years, and a 5-year average annual dividend growth of over 10% (far exceeding the rate of inflation).
Most of these stocks are also, due to the recent favor the sector has been enjoying, at or near their 52-week highs. It might be prudent to wait for a bit of a pullback, perhaps in the 5 to 10% range, before entering any new positions. On the other hand, these stocks are presumably going to be in your portfolio for the long run, so do not be so eager to save a few bucks on entry that you miss the boat entirely.
In no particular order:
1. Enbridge (NYSE: ENB) is currently trading at approximately $39 per share and offers a yield of 2.8%. It has a 16-year history of consistently paying and raising dividends, and its 5-year average annual dividend growth rate is 10.56%. The stock is currently trading at about a 7% discount to its 52-week high, which is an ideal place to enter, before it resumes its upward trajectory.
2. Conoco Phillips (NYSE: COP) is currently trading at $57 and offers a yield of 4.6%. It has an 11-year history of consistently paying and raising dividends, and a 5-year annual dividend growth rate of 10.86%.
3. Johnson Controls (NYSE: JCI) is trading at $28 and offers a yield of 2.6%. It has a 36-year history of paying and raising dividends, and its 5-year average annual dividend growth rate is 10.83%. It is currently trading at 27% off its 52-week high.
4. United Technologies (NYSE: UTX) is trading at $81 and offers a 2.7% yield. The company has a 19-year history of paying and raising dividends, and its 5-year average annual dividend growth rate is 12.21%. It is trading at 7% less than its 52-week high.
5. Meredith Corporation (NYSE: MDP) is trading at $36 and yields 4.1%, with a 19-year history of paying and raising dividends consistently. Its 5-year annual dividend growth rate is 17.73%, and the company is currently trading at a 5% discount to its 52-week high.
6. Harris Corporation is trading at $51 and yields 2.6%. It has a 10-year history of paying and raising dividends, and a 5-year average annual growth rate of 22.58%. It is currently trading at its 52-week high.
7. Owens & Minor is trading at $31 and yields 2.9%. It has a 14-year history of paying and raising its dividend, and its 5-year annual average growth rate is 14.36%. It is currently trading at 4% less than its 52-week high.
There are hundreds of stocks that pay dividends, and some pay far more than the ones listed here. But yield should be only one of the factors that you consider when picking dividend stocks. Consistency of payment and opportunity for dividend growth at least commensurate with the rate of inflation are important factors as well.
Some stocks that I considered, that nearly made this list, Abbot Labs and Avista. Abbot’s 5-year dividend growth rate was just under the 10% threshold, and Avista only has a 9-year history.
I believe that these 7 companies represent some of the best-paying, most consistent, most stable dividend-paying stocks in the entire stock universe. They will be steadily increasing their dividends, and will reward you for years to come.
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