Dividend Growth Stocks For Intelligent Investors - July 2016

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Includes: AFL, BEN, CINF, CTAS, GWW, PBCT, ROST, TROW, UTX, VFC
by: Benjamin Clark

Summary

These companies are all rated as suitable for the Defensive Investor and/or the Enterprising Investor following the ModernGraham approach.

All are found to be either significantly undervalued or fairly valued according to the ModernGraham valuation model.

The companies have all grown their dividends for at least twenty straight years.

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Dividend growth investing is a very popular approach which can fit within the ModernGraham methods. This article will look at companies reviewed by ModernGraham which have grown their dividends annually for at least the last 20 years.

Recently, I began tracking the number of years a company has grown its dividend, and providing that information in my individual company valuations. I have covered 451 companies since that tracking began. Eventually I will have this data on each of the near 550 companies covered by ModernGraham, so this list should continue to grow for the next few months.

Out of the 451 companies on which I have dividend growth data, only 51 have grown dividends annually for at least the last 20 years. Here is an overview of those companies:

The Elite

The following companies have been rated as undervalued and suitable for either the Defensive Investor or the Enterprising Investor:

AFLAC Incorporated (NYSE:AFL)

Aflac Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.72 in 2012 to an estimated $6.24 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.40% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Franklin Resources, Inc. (NYSE:BEN)

Franklin Resources Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial condition. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.50 in 2012 to an estimated $3.17 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.00% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Cintas Corporation (NASDAQ:CTAS)

Cintas Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.07 in 2013 to an estimated $4.36 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 8.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

People's United Financial, Inc. (NASDAQ:PBCT)

People's United Financial, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.51 in 2012 to an estimated $0.83 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 4.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

T. Rowe Price Group Inc (NASDAQ:TROW)

T. Rowe Price Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.75 in 2012 to an estimated $4.25 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 4.02% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

United Technologies Corporation (NYSE:UTX)

United Technologies Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.17 in 2012 to an estimated $7.65 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

VF Corp (NYSE:VFC)

VF Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.48 in 2011 to an estimated $2.66 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 7.59% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

The Good

The following companies have been rated as fairly valued and suitable for either the Defensive Investor or the Enterprising Investor:

Cincinnati Financial Corporation (NASDAQ:CINF)

Cincinnati Financial Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.12 in 2012 to an estimated $3.21 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 6.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

W W Grainger Inc (NYSE:GWW)

W W Grainger Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only initially concerned by the high PB ratio while the Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $7.12 in 2011 to an estimated $10.94 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 4.71% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.

Ross Stores, Inc. (NASDAQ:ROST)

Ross Stores, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.36 in 2013 to an estimated $2.35 for 2017. This level of demonstrated earnings growth supports the market's implied estimate of 7.44% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Disclosure: I am/we are long PBCT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.