Dividend investors rely on dividend growth to deliver capital appreciation and income from stocks. Many investors also rely on analyst ratings to identify stocks poised for solid returns. We have combined those two ideas to identify buy rated dividend growth stocks. We were surprised to find that only 3 stocks with dividend growth rates over 10% had buy ratings from analysts.
Each of the 5 stocks we found has a dividend yield of 3% or more, has raised the dividend for the last 3 consecutive years and has a 5-year dividend growth rate over 5%. Add to that favorable analyst ratings with no recent downgrades and you will not come by many stocks. We found only 5 that met our buy-rated dividend growth criteria.
Digital Realty Trust (DLR)
Digital Realty Trust is a REIT that focuses on technology related real estate by buying, developing and managing such properties. It owns 98 data center properties in 31 different markets around the world. DLR has 11 buy ratings, 5 hold ratings and 1 sell rating. Despite the overall buy rating DLR has had 2 neutral ratings so far in 2012.
DLR has a dividend yield of 3.8% and has increased its dividend for the last 6 years. The 5-year dividend growth rate is 21% and the 3-year net income growth rate is 36%. DLR is one of our top-rated REITs.
Novartis AG (NVS)
Novartis is a healthcare solution provider. It focuses on developing and manufacturing a large number of healthcare products such as medicines, eye care and preventive vaccines. NVS has 4 buy ratings and 2 hold ratings but no sell ratings.
NVS has a dividend yield of 4.2% and has increased the dividend for 5 consecutive years. One thing to note is that it pays the dividend annually and has an ex-dividend date coming up February 27, 2012. The 5-year dividend growth rate is 22.2% and the payout ratio is 63%.
Johnson & Johnson (JNJ)
Most dividend investors are familiar with Johnson & Johnson because of its stellar dividend performance. JNJ develops and manufactures healthcare products for the world. It creates and markets the products through more than 250 global companies. JNJ has 15 buy ratings, 11 hold ratings and no sell ratings.
Johnson & Johnson has a dividend yield of 3.4% and has increased the dividend for 49 consecutive years. Their payout ratio is a sustainable 55% and the 5-year dividend growth rate is 9.1% making it one of our top-rated safe dividend stocks.
Plains All American Pipeline (PAA)
Plains All American Pipeline is a limited partnership that transports and stores crude oil, petroleum gas and natural gas. It also acquires and develops natural gas storage facilities in the U.S. PAA has 13 buy ratings, 3 hold ratings and no sell ratings.
PAA has a dividend yield of 5.1% and has increased the dividend for 12 consecutive years. The 5-year dividend growth rate is 5.9%. The 3-year net income growth rate is 11.4%.
Enterprise Products Partners (EPD)
Enterprise Products Partners is a limited partnership that operates in North America that provides services to consumer and producers of natural gas and oil. The services include onshore and offshore pipeline services and refined product services. EPD has 18 buy ratings, 3 hold ratings and 0 sell ratings from analysts.
EPD has a dividend yield of 4.8% and has increased its dividend for 13 consecutive years. The 5-year dividend growth rate is 5.9%.
Disclosure: I am long JNJ.