50+ Stocks Selected For Growth, Value, And Income: An Improved List
Oct. 2, 2017 9:33 AM
- The updated list has 56 stocks.
- The stocks are ranked by a new metric.
- Investors of all types should find something to like, whether they are income, GARP, DGI, value, or growth investors.
This is an update to my published watch list, which I created for the Sound Growth IRA , a portfolio I developed for my own IRA account. I have already bought numerous stocks for the IRA based on the list, which I intend to detail in a separate article later, and they are already doing quite well: (CCF), (LMAT), (OTCPK:EXCOF), (TPL), (AOS), (WSM), and (PAYX). I continue to deploy more funds based on this list going forward. For articles I have written on some of these companies and others, please see my Seeking Alpha profile page.
The companies on the watch list have the following characteristics:
- Value: The company has positive Net Current Asset Value [NCAV].
- Income: The company not only pays a dividend, but has increased dividend payments at least once a year.
- Growth: Earnings must have increased a minimum of three of the past four years. In addition, companies must have a Forward Rate of Return of greater than 7%.
I used David Fish’s U. S. Dividend Champions list as a starting point to find these stocks, and screened for the criteria above. I also found stocks in the Canadian Dividend All-Star list.
These are not the only stocks I watch or own, but they are the primary set I watch.
New Elements of the Watch List
Both the U. S. Dividend Champions list and the Canadian Dividend All Star lists are updated monthly. The watch list now uses the latest update (August 2017) from both lists. The watch list now has a number of stocks it did not have before. Some stocks have also been bumped off the list.
When I first published the watch list, I wrote that I was not satisfied with the ranking system I was using. That used a combination of the Owner Earnings ratio and PEG. I have since found a metric that measures annualized free cash flow growth against price, called the Forward Rate of Return. (For an example of the calculation using MasterCard (NYSE:MA), see the bottom of this page.) The watch list has been reshuffled with the metric.
The Updated List
Using the Forward Rate of Return to rank the stocks, value stocks tend to float to the top of the list, stalwart income stocks tend to drop to the bottom, and GARP stocks generally hover in the middle to top range. Since I am 15 or more years from retirement, I am more of a GARP investor, and I tend to concentrate on the top half of the list.
I have also bolded PEGs of 1.05 or less. These should be of more interest to value hunters and GARP investors.
Nine or more consecutive years of increased dividend payouts have been bolded. This highlights companies that were able to grow dividends through the Great Recession. While there is no guarantee that these companies will continue the payout in the next downturn, these companies are more likely to than others.
The list includes two S P dividend aristocrats, companies that have increased their dividend payouts for 25 consecutive years: Genuine Parts (GPC) with 61 years, and Automatic Data Processing (ADP) with 42 years. A. O. Smith (AOS) is months away from qualifying as an S P dividend aristocrat, with 24 years.
In addition, the list includes two dividend champions, companies outside of the S P that have increased their dividend payouts for 25 consecutive years or more: Tootsie Roll Industries (TR) with 51 years, and Jack Henry Associates (JKHY) with 27 years.
Eighteen stocks, a third of the list, are on the S P 500.