5 High-DGR Dividend Stocks: "Plain Dividend Yield is for Chumps" - Part 2

Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

This is the second half of my analysis of the ten stocks listed in the Y-Charts article “Plain Dividend Yield is for Chumps.” In that article, the author defines 10 companies that are Dividend Aristocrats, meaning they have been paying and raising dividends for at least 25 years, and that have a high Dividend Growth Rate, or DGR.

When I am analyzing companies for my Dividend Portfolio, I use a 7-criteria rating system, and assign each of the seven categories a point value from 1 (lowest) to 4 (highest). The perfect score would be a 28, but I have never yet seen a company that rates above a 20. So far the companies that I have chosen for my portfolio rate in the 18-20 point range. A company which scores 16-17 points stays on my list for further scrutiny, but anything that scores 15 or lower is relegated to my rejection pile.

In this article I am looking at the second five dividend-paying companies on the Y-Charts list. 

The number six company on the Y-Charts list is Aflac (NYSE: AFL). This company has been on my watch list for months. It is currently trading at $51 per share and yields 2.7%. The company has been paying and raising dividends consistently for 30 years, and its Dividend Growth Rate (DGR) is 11.1%. Its PE is an unbelievably low 8.5, and its twelve-month total return is 25.9%. The payout ratio is a low 22%, which is frustrating to me because I would love to see them raise the dividend to 3.0%. The company is currently trading at 6% off its 52-week high of $54.93 and is up 7% from last year.

The 20 analysts who cover the company rate the stock a 2.5 (1.0 = Strong Buy, 5.0 = Sell). It has two Strong Buys, eight Buys, and 10 Holds. They have set a one-year target price on the company of $58.81, which is a potential gain of 15%. Within the Motley Fool community, AFL is a five-star CAPS pick, with 1,937 Bulls and 82 Bears (96% positive sentiment).

Aflac scores a 22 on my ratings system, which would be the highest score of any company in my Dividend Portfolio. However, the dividend at 2.7% is just a bit too low. While the dividend has been appreciating significantly, so has the price of the stock, so there has not been a rise in yield. I really want to add Aflac to my portfolio, and I may make an exception at some point, but right now I am leaving it on my Watch Closely list, and hoping there is a dividend spike or a slight price decline to bring it into my range.

The next company on the list is Medtronic (NYSE: MDT). The company is trading at $45 per share and yields 2.4%. It has been paying and raising dividends for 35 years and has a 5-year DGR of 16.7%. The PE is 13.9, and the twelve-month total return is 18.4%. The payout ratio is a low 31%. The company is currently trading at its 52-week high and is up 16% from last year.

The 25 analysts who cover the company rate the stock a 2.2 with seven Strong Buys, five Buys, and 13 Holds. They have set a one-year target price on the company of $46.79, which is a potential gain of 3%. The Motley Fool community rates MDT a five-star CAPS pick, with 1,707 Bulls and 91 Bears (95% positive sentiment).

Medtronic scores a 20 on my ratings system. At a 2.4% yield, it might make it onto my list with another good dividend increase or a slight price decline. Another frustratingly low payout ratio on a potentially great dividend-paying stock. Another addition to my Watch Closely list.

Number eight is Wal-Mart (NYSE: WMT), which is currently trading at $69 per share and yields 2.3%. The company has been paying and raising dividends for 37 years, with a 5-year DGR of 12.7%. The PE is 14.2, and the twelve-month total return is 17.7%. The payout ratio is reasonable at 33%. The company is currently trading at 11% less than its 52-week high of $77.60, reached in October.

The 26 analysts who cover the company rate the stock a 2.3 with eight Strong Buys, four Buys, 13 Holds, and one Underperform. They have set a one-year target price on the company of $79.06, which is a potential gain of 15%. The Motley Fool community rates WMT a four-star CAPS pick, with 6,269 Bulls and 764 Bears (89% positive sentiment).

Wal-Mart also scores a 20 on my ratings system. Frustrating. Another one on the Watch Closely list.

The next company on the list is T. Rowe Price (NASDAQ: TROW). The company is currently trading at $71 per share and yields 2.0%. The company has been paying and raising dividends for 25 years, with a 5-year DGR of 12.6%. T. Rowe’s PE is 22.2, and its twelve-month total return is 22.5%. The payout ratio is 40.3%. The company is currently trading at its 52-week high, and is up 18.6% from last year.

The 24 professional analysts who cover the company rate the stock a 2.3 with five Strong Buys, six Buys, and 13 Holds. They have set a one-year target price on the company of $70.74. The Motley Fool community rates TROW a three-star CAPS pick, with 374 Bulls and 28 Bears (93% positive sentiment).

Again, T. Rowe Price scores a 20 on my ratings system, but its dividend yield is just too low for me. I will put it on my list to Watch Closely for dividend hikes.

The last company on the Y-Charts list is Clorox (NYSE: CLX). The company is currently trading at $76 per share and yields 3.4%. It has been paying and raising dividends for 36 years, with a 5-year DGR of 11.9%. Its PE is 18.2, and its twelve-month total return is 15.1%.  The payout ratio is high at 73%. The company is currently trading at its 52-week high, and is up 9% from last year.

The 17 analysts who cover the company rate the stock a 2.9 with one Strong Buy, one Buy, 14 Holds, and one Underperform. They have set a one-year target price on the company of $76. The Motley Fool community rates CLX a five-star CAPS pick, with 838 Bulls and 38 Bears (96% positive sentiment).

Clorox scores a 16 on my ratings system, and will likely not make it into my Dividend Portfolio.

I have found this evaluation of the Y-Charts list to be a valuable exercise, as many of these are companies that I have not already examined, and I would have eliminated them for their low dividend yields. Clearly, though, these all demonstrate extremely high-quality dividend metrics, as well as valuation and future growth potential, and I am keeping an eye on them for their possible inclusion in my Dividend Portfolio in the future.


khern0203 has no position in any stocks mentioned. The Motley Fool recommends Aflac. The Motley Fool owns shares of Medtronic and The Clorox Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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