10 Dividend Growth Stocks For November 2016

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Includes: ADM, CMI, IBM, LMT, PEP, QCOM, TGT, TROW, TXN, VFC
by: FerdiS

Summary

I rank a selection of David Fish's CCC dividend growth stocks every month. The top 10 ranked stocks are great candidates for further analysis.

I use different screens every month to trim the list of more than 750 stocks to a more manageable number of candidates.

I rank these candidates and assign a 7-star rating to each stock. Stocks with 5 stars or better are worthy of further analysis.

This article reveals the top 10 ranked stocks for November, as well as their ratings.

David Fish's CCC list is a wonderful source for dividend growth investors. Compiled and updated every month, the CCC list contains U.S. companies with at least 5 consecutive years of increasing dividends. The accompanying spreadsheet provides key statistics of the CCC stocks.

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The CCC stocks are divided into 3 categories based on the number of consecutive years of increases: Champions are stocks with 25 or more years of increasing dividends. Contenders have 10-24 consecutive years of dividend increases. And Challengers have a streak of 5-9 years of increasing dividends. The latest list (dated 10/31/16) contains 771 stocks, with 108 Champions, 228 Contenders, and 435 Challengers.

Trimming The CCC List

Ranking 771 stocks would be quite demanding, so first I apply some screens to trim the CCC list. Using different screens every month introduces variation. This month, I applied the following screens:

  • Market Cap ≥ $1 Billion (removes 167 stocks)
  • Dividend Increase Streak ≥ 10 (removes 333 stocks)
  • 2.75% ≤ Dividend Yield ≤ 7.75% (removes 170 stocks)
  • 5-Yr Dividend Growth Rate ≥ 5.0 (removes 33 stocks)
  • 3-Yr Dividend Growth Rate ≥ 7.0 (removes 17 stocks)
  • 1-Yr Dividend Growth Rate ≥ 9.0 (removes 20 stocks)

Only 31 CCC stocks passed these screens.

The Ranking Process

Because only 31 stocks passed this month's screens, I ranked all of them using data from the CCC list and additional sources like Morningstar, S&P Capital IQ, and F.A.S.T. Graphs.

Here are the top 10 ranked stocks for November 2016, with stocks I own in my DivGro portfolio highlighted:

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Four stocks from last month's top 10 appear in this month's top 10. These stocks are identified with a subscript that represents last month's ranking. For example, VFC1 means that VFC was ranked first last month.

The following table presents the top 10 ranked stocks by sector, along with my star ratings for each stock. Only the top ranked stock earned a 7-star rating this month. I consider stocks with a 5-star rating or better worthy of further analysis.

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In the descriptions below, yield is calculated based on closing prices on 7 October 2016, payout is the EPS (earnings per share) payout ratio, and debt is the debt to equity ratio. Morningstar's moat and Standard and Poor's credit ratings are also provided. Value Line's safety and financial strength ratings round things out.

Please note: Fair value estimates below are averages of fair value estimates from several sources, including my own. Specifically, I consider fair value estimates from up to 8 sources, but I ignore the highest and lowest estimates and average the remaining estimates to arrive at a final fair value estimate.

• VF Corp. (NYSE:VFC)
streak 44 yrs | 5-yr growth rate 17.0% | yield 3.08%@ $54.52
payout 58% | debt 63% | moat wide | credit rating A

safety 2 | financial strength A

Dividend Champion VFC is a global leader in the design, manufacture, marketing and distribution of branded lifestyle apparel, footwear, and accessories. The company owns powerful brands including The North Face, Vans, Timberland, Wrangler, Lee, and Nautica. VFC was founded in 1899 and is headquartered in Greensboro, North Carolina. VFC trades 4% below my fair value estimate of $56.97.

• T. Rowe Price Group (NASDAQ:TROW)
streak 30 yrs | 5-yr growth rate 14.0% | yield 2.94%@ $73.47
payout 52% | debt 0% | moat wide | credit rating N/A

safety 2 | financial strength A+

Founded in 1937 and based in Baltimore, Maryland, Dividend Champion TROW is a financial services holding company that provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds and other investment portfolios, as well as through variable annuity life insurance plans. TROW trades close to my fair value estimate of $74.50.

• Texas Instruments (NASDAQ:TXN)
streak 13 yrs | 5-yr growth rate 23.4% | yield 2.75%@ $72.60
payout 67% | debt 36% | moat wide | credit rating A+

safety 1 | financial strength A++

TXN designs, makes and sells semiconductors to electronics designers and manufacturers worldwide. The company operates mainly through two segments, Analog and Embedded Processing. It markets and sells products through a direct sales force and through distributors. TXN was founded in 1930 and is headquartered in Dallas, Texas. The stock is trading at a premium of 17% to my fair value estimate of $61.87.

• Target Corp. (NYSE:TGT)
streak 49 yrs | 5-yr growth rate 20.8% | yield 3.15%@ $76.19
payout 47% | debt 110% | moat none | credit rating A

safety 1 | financial strength A

Dividend Champion TGT sells a range of general merchandise and discount food products in about 1,800 stores in the United States. The company offers both everyday essentials and fashionable, differentiated merchandise at discount prices. TGT operates as a single business segment and has a fully integrated online business, Target.com. TGT was founded in 1902 and is headquartered in Minneapolis, Minnesota. My fair value estimate for TGT is $79.82, so the stock is trading at a discount of 5%.

• International Business Machines (NYSE:IBM)
streak 21 yrs | 5-yr growth rate 14.9% | yield 3.49%@ $160.39
payout 46% | debt 250% | moat narrow | credit rating AA-

safety 1 | financial strength A++

Founded in 1910 and headquartered in Armonk, New York, IBM is an information technology company engaged in the development and manufacturing of advanced computer systems, software, storage systems, and microelectronics. The company creates business value for clients and solves business problems through integrated solutions that leverage information technology and knowledge of business processes. IBM trades 3% above my fair value estimate of $155.56.

• Qualcomm Inc. (NASDAQ:QCOM)
streak 14 yrs | 5-yr growth rate 20.2% | yield 3.15%@ $67.31
payout 62% | debt 38% | moat narrow | credit rating A+

safety 1 | financial strength A++

Founded in July 1985 and headquartered in San Diego, California, QCOM designs and manufactures innovative digital wireless communications products and services based on the company's CDMA digital technology. QCOM also licenses many of its 5,700+ patents and intellectual property to wireless equipment manufacturers. QCOM trades at a discount of 7% to my fair value estimate of $72.69.

• Archer Daniels Midland (NYSE:ADM)
streak 41 yrs | 5-yr growth rate 13.3% | yield 2.76%@ $43.49
payout 49% | debt 42% | moat none | credit rating A

safety 2 | financial strength A+

Founded in 1898 and headquartered in Chicago, Illinois, Dividend Champion ADM is engaged in the processing of oilseeds, corn, wheat, cocoa, and other agricultural commodities. The company manufactures protein meal, vegetable oil, corn sweeteners, flour, and other value-added food and feed ingredients, as well as biodiesel and ethanol. ADM trades 4% above my fair value estimate of $41.91.

• Lockheed Martin (NYSE:LMT)
streak 14 yrs | 5-yr growth rate 18.4% | yield 2.77%@ $263.09
payout 61% | debt 616% | moat wide | credit rating BBB+

safety 1 | financial strength A++

Founded in 1909 and headquartered in Bethesda, Maryland, LMT is a global security and aerospace company engaged in the research, design, development, manufacture and integration of advanced technology systems. The company also provides management, engineering, technical, scientific, logistics, and information services. LMT employs nearly 100,000 people. LMT is trading at a premium of 17% to my fair value estimate of $225.00.

• PepsiCo Inc. (NYSE:PEP)
streak 44 yrs | 5-yr growth rate 8.2% | yield 2.97%@ $101.31
payout 66% | debt 279% | moat wide | credit rating A

safety 1 | financial strength A++

Dividend Champion PEP is a global food and beverage company. It manufactures, markets, distributes and sells a variety of beverages and foods in more than 200 countries and territories. The company distributes beverages under well-known brands such as Pepsi, Gatorade, Mountain Dew, 7UP and Tropicana, and food and snacks under brands such as Quaker, Lay's, Doritos, Cheetos, and Ruffles. PEP was founded in 1898 and is headquartered in Purchase, New York. My fair value estimate for PEP is $96.76, so the stock is trading at a premium of 5% to fair value.

• Cummins Inc. (NASDAQ:CMI)
streak 11 yrs | 5-yr growth rate 32.0% | yield 3.04%@ $135.03
payout 56% | debt 27% | moat narrow | credit rating A+

safety 3 | financial strength A+

Founded in 1919 and headquartered in Columbus, Indiana, CMI is one of the leading designers and manufacturers of diesel engines. The company also produces natural gas engines and engine components and subsystems. CMI sells its products to original equipment manufacturers, distributors, and other customers worldwide. My fair value estimate for CMI is $119.79, so the stock is trading at a premium of 13%.

Top 10 Snowflakes

Simply Wall St is a Sydney-based startup that offers various analysis and visualization tools. A particularly useful graphic is the Snowflake, a visual summary of 30 different checks that Simply Wall St performs when analyzing stocks.

Each snowflake represents Value, Future, Past, Health, and Dividend scores. The Value score indicates how undervalued a stock is. The Future score represents growth expectations based on analyst estimates, while the Past score captures a stock's past performance. The Health score considers a company's balance sheet and debt levels, and the Dividend score measures the quality and sustainability of a company's dividend.

The color of each snowflake changes from red to green depending on the number of checks a stock passed.

Here are the snowflakes of this month's Top 10 stocks:

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Please note that the top 10 ranked stocks are candidates for further analysis, not recommendations.

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Disclosure: I am/we are long TROW,TGT,IBM,QCOM,LMT,CMI.

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