50+ Stocks Selected For Growth, Value, And Income: An Improved List

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Includes: ACU, ADI, ADP, AMNF, AOS, APOG, ATRI, BBY, BSET, CCF, CMD, COLM, CSVI, CVGW, DOX, EGHSF, EXCOF, EXPD, FAST, FIX, FL, FLXS, GIL, GNTX, GPC, HAS, HCSG, HDIUF, JKHY, KAI, KEQU, KLAC, LMAT, LSTR, LZB, MA, MKSI, MLR, PAYX, RHI, RHUHF, RMD, ROL, ROST, SIG, STLJF, THO, TPL, TR, TSCO, TTC, TXN, WDFC, WSM, ZCLCF
by: Steven Miller

Summary

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.

Name

Ticker

S&P 500

# of Years Div. Up

PEG

Forward Rate of Return

Bassett Furniture Industries

(BSET)

7

10.62

36.93

Apogee Enterprises

(APOG)

7

0.48

34.17

MKS Instruments

(MKSI)

7

1.92

33.95

Hardwoods Distribution

(OTC:HDIUF), HWD.TO

6

0.33

33.31

Chase

(CCF)

5

0.88

28.66

LeMaitre Vascular

(LMAT)

7

2.23

28.20

Gildan Activewear

(GIL)

7

1.05

28.13

Thor Industries

(THO)

7

0.79

28.08

Exco Technologies

(OTCPK:EXCOF), XTC.TO

11

0.41

26.12

Enghouse Systems

(OTCPK:EGHSF), ENGH.TO

10

1.38

25.14

Texas Pacific Land Trust

(TPL)

14

2.76

24.73

Gentex

(GNTX)

7

0.84

24.27

Foot Locker

(FL)

X

7

0.43

23.42

Computer Services

(OTCQX:CSVI)

46

3.78

22.95

A. O. Smith

(AOS)

X

24

1.50

21.34

Texas Instruments

(TXN)

X

13

1.58

21.29

Stella-Jones

(OTC:STLJF), SJ.TO

12

1.15

21.23

Robert Half International

(RHI)

X

14

1.03

20.56

La-Z-Boy

(LZB)

5

0.94

20.47

Best Buy

(BBY)

X

15

2.20

20.17

Columbia Sportswear

(COLM)

11

1.52

19.83

MasterCard

(MA)

X

6

2.02

17.23

Flexsteel Industries

(FLXS)

6

1.05

17.92

Miller Industries

(MLR)

8

3.27

17.79

Tractor Supply

(TSCO)

X

8

1.13

17.50

Armanino Foods

(OTCPK:AMNF)

11

1.35

16.93

Ross Stores

(ROST)

X

23

1.41

16.51

Cantel Medical

(CMD)

8

2.69

16.47

Signet Jewelers

(SIG)

X

7

0.83

16.17

Jack Henry & Associates

(JKHY)

27

2.61

15.69

Comfort Systems USA

(FIX)

5

15.40

Kadant

(KAI)

5

3.58

13.94

Williams-Sonoma

(WSM)

12

1.50

13.83

Expeditors International

(EXPD)

X

23

3.27

13.65

Hasbro

(HAS)

X

14

2.67

13.58

Toro

(TTC)

8

1.73

13.27

WD-40

(WDFC)

8

2.83

12.91

Amdocs

(DOX)

6

2.72

12.35

Health Care Service Group

(HCSG)

15

4.81

12.08

Richelieu Hardware

(OTC:RHUHF), RCH.TO

7

2.97

11.92

Rollins

(ROL)

15

5.43

11.82

ZCL Composites

(OTCPK:ZCLCF), ZCL.TO

5

1.07

11.68

Tootsie Roll Industries

(TR)

51

3.65

11.58

Landstar System

(LSTR)

13

3.43

11.51

Paychex

(PAYX)

X

7

3.47

11.25

KLA-Tencor

(KLAC)

X

8

3.00

10.73

Automatic Data Processing

(ADP)

X

42

3.85

10.98

Genuine Parts

(GPC)

X

61

3.52

10.18

Acme United

(ACU)

14

1.67

9.90

Analog Devices

(ADI)

X

15

45.11

9.81

Fastenal

(FAST)

X

18

2.89

9.52

Calavo Growers

(CVGW)

5

1.08

9.49*

ResMed

(RMD)

X

6

5.02

8.56

Atrion

(ATRI)

15

6.89

7.71

Kewaunee Scientific

(KEQU)

5

2.49

7.05

* The Forward Rate of Return reported for CVGW was -14.75. I have yet to find a reason for the negative number, and calculate the number to be 9.49.

In Summary

These 56 stocks are selected for growth, value, and income. They range across a variety of sectors, from the smallest of the microcaps to well-known names on the S&P 500.

The list is a watch list, not a buy list. Its value is providing a starting point for further investigation and due diligence. Value investors will want to concentrate on the top of the list, income investors will be more interested in the bottom of the list, and GARP investors will be more interested in the middle.

Notice Regarding PEG Ratios

I have demonstrated in an article that PEG ratios for the same stock on the same day can vary widely. While all figures are thought to be generally correct, no guarantee is expressed or implied. Please do your due diligence.

Sources

Unless otherwise noted, PEG ratios and Forward Rate of Return figures were taken at GuruFocus.com. Stock prices were taken from BigCharts.com. The image is from geralt.

Disclosure: I am/we are long CCF, LMAT, EXCOF, TPL, AOS, MA, WSM, PAYX.

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.

Additional disclosure: I may initiate a position in HAS, CSVI, and AMNF in the next 72 hours.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.