Top Dividend Growth Stocks By Sector

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Includes: AAPL, ABC, ACN, ADM, ADP, AEP, AFL, ALB, AMGN, AMP, AMT, AOS, APD, ATO, BA, BAC, BEN, CAH, CB, CHD, CMCSA, CMI, CSCO, CVS, CVX, D, DGX, DIS, DLR, ECL, ED, ES, EVR, FDX, FRT, GD, HD, HRL, IBM, IFF, ITW, JNJ, KR, LAZ, LMT, LOW, LYB, MDT, MDU, MO, MSFT, NEE, NKE, NNN, NOC, NUE, NVDA, O, OHI, OKE, OMC, ORCL, OXY, OZK, PAYX, PEP, PFE, PG, PPG, PSA, PSX, PX, ROST, RTN, SJM, SKT, SLGN, SYK, T, TDS, TGT, TJX, TROW, TRV, TXN, UGI, UNH, UNP, VLO, VTR, VZ, WBA, WEC, WLK, WMT, WPC, XEL, XOM
by: FerdiS

Summary

Every month I rank a selection of the CCC stocks and present 10 stocks worthy of consideration.

This month I ranked 240 CCC stocks, which is significantly more than usual. Ranking so many stocks allows me to identify the top-ranked stocks by sector.

Ranking so many stocks allows me to identify top-ranked stocks by sector. This article presents up to 10 top-ranked stocks per sector.

Last Saturday, I published the September edition of my 10 Dividend Growth Stocks series. The top-ranked stock this month is Comcast (CMCSA), one of five Consumer Discretionary sector stocks in the 10 top-ranked stocks.

I rank a selection of the CCC stocks every month and present 10 stocks worthy of consideration. This month I ranked 240 CCC stocks, significantly more than I usually do. The ranking process is quite involved, as I manually collect data from several sources. Prior to this month's ranking of 240 CCC stocks, I've limited the number to about 50 stocks at a time.

One advantage of ranking so many stocks is that I can review the top-ranked stocks by sector. Dividend growth investors should find these sector-based lists informative, especially for purposes of diversification.

Recap of Ranking Process

Details on the composition of the 240 CCC stocks can be found in the linked article above. In essence, the list contains quality dividend growth stocks with established track records of paying and regularly increasing dividends.

Overwhelmingly, the stocks are dividend growth stocks with at least 10 consecutive years of dividend increases and have market caps of at least $1 billion. Most of the stocks have current yields of at least 1%, although I gave a free pass to a few dividend growth stocks in my DivGro portfolio that yield less than 1%.

Collectively, the 240 stocks have returned 17.4% over the last year and have outperformed the S&P 500 by about 29% over the last five years:

Source: finbox.io

My ranking process uses data in the CCC spreadsheet and additional sources like Finviz.com, Morningstar, F.A.S.T. Graphs, finbox.io, and Simply Safe Dividends.

It favors established dividend paying stocks with strong fundamentals and stocks potentially trading at or below fair value. Dividend safety is another important factor.

A byproduct of my ranking process is a 7-star rating. Based on past experience, I consider stocks with 5-star ratings or better worthy of further analysis.

Top-Ranked Stocks by Sector

Following are the top-ranked dividend growth stocks by GICS sector.

I'm presenting up to 10 stocks per sector in rank order. For each sector, I present a summary table with key metrics and fair value estimates. Following the summary table, I provide my star ratings for each stock (out of 7 stars).

In the summary table, I've highlighted stocks I own in my DivGro portfolio.

Yrs are the years of consecutive dividend increases, Payout is the EPS payout ratio and Debt is the ratio of debt to equity. When available, the compound dividend growth rate over a 5-year period (5-Yr DGR) is provided. Standard & Poor's Credit Rating, as well as Value Line's Safety and financial strength (Fin. Strength) ratings also are provided. I've added the Safety score (out of 100) from Simply Safe Dividends.

Finally, I present my own estimate of Fair Value. To estimate fair value, I use proprietary implementations of the multi-stage Dividend Discount Model and the Gordon Growth Model. I also reference fair value estimates and target prices from other sources, including Morningstar, finbox.io, and Simply Wall St. With up to nine estimates available, my final fair value estimate ignores the lowest and highest, then averages the median and mean of the remaining estimates.

Consumer Discretionary

Comcast

rank #1 • ✭✭✭✭✭✭✭

Lowe's (LOW)

rank #3 • ✭✭✭✭✭✭✭

Home Depot (HD)

rank #4 • ✭✭✭✭✭✭✭

TJX Companies (TJX)

rank #5 • ✭✭✭✭✭✭✩

Ross Stores (ROST)

rank #7 • ✭✭✭✭✭✭✩

Starbucks (NASDAQ:SBUX)

rank #13 • ✭✭✭✭✭✭✩

Walt Disney (DIS)

rank #14 • ✭✭✭✭✭✭✩

Nike (NKE)

rank #17 • ✭✭✭✭✭✭✩

Omnicom Group (OMC)

rank #34 • ✭✭✭✭✭✭✩

Target (TGT)

rank #41 • ✭✭✭✭✭✭✩

Only three of the Consumer Discretionary sector stocks are trading at a discount to fair value. I own all but two of the stocks. All ten stocks would be present in a portfolio of the 50 top-ranked stocks.

Consumer Staples

Hormel Foods (HRL)

rank #10 • ✭✭✭✭✭✭✩

Walgreens Boots Alliance (WBA)

rank #31 • ✭✭✭✭✭✭✩

PepsiCo (PEP)

rank #45 • ✭✭✭✭✭✩✩

Altria (MO)

rank #49 • ✭✭✭✭✭✩✩

Kroger (KR)

rank #50 • ✭✭✭✭✭✩✩

J.M. Smucker (SJM)

rank #51 • ✭✭✭✭✭✩✩

Archer Daniels Midland (ADM)

rank #60 • ✭✭✭✭✭✩✩

Procter & Gamble (PG)

rank #61 • ✭✭✭✭✭✩✩

Church & Dwight (CHD)

rank #63 • ✭✭✭✭✭✩✩

Walmart (WMT)

rank #64 • ✭✭✭✭✭✩✩

Only three of the Consumer Staples sector stocks are trading at a discount to fair value. I own five of the stocks. Five stocks would be present in a portfolio of the 50 top-ranked stocks.

Energy

Phillips 66 (PSX)

rank #48 • ✭✭✭✭✭✩✩

Exxon Mobil (XOM)

rank #56 • ✭✭✭✭✭✩✩

Valero Energy (VLO)

rank #57 • ✭✭✭✭✭✩✩

Chevron (CVX)

rank #73 • ✭✭✭✭✭✩✩

ONEOK (OKE)

rank #164 • ✭✭✭✭✩✩✩

Occidental Petroleum (OXY)

rank #191 • ✭✭✭✭✩✩✩

Only six Energy sector stocks are present in the list of 240 CCC stocks. All of them are trading below fair value. I own two of the stocks. Only one stock would be present in a portfolio of the 50 top-ranked stocks.

Financials

Franklin Resources (BEN)

rank #11 • ✭✭✭✭✭✭✩

T. Rowe Price (TROW)

rank #47 • ✭✭✭✭✭✩✩

Travelers (TRV)

rank #53 • ✭✭✭✭✭✩✩

Ameriprise Financial (AMP)

rank #59 • ✭✭✭✭✭✩✩

Bank of America (BAC)

rank #77 • ✭✭✭✭✭✩✩

Aflac (AFL)

rank #98 • ✭✭✭✭✭✩✩

Bank OZK (OZK)

rank #105 • ✭✭✭✭✭✩✩

Evercore Partners (EVR)

rank #111 • ✭✭✭✭✭✩✩

Lazard (LAZ)

rank #117 • ✭✭✭✭✭✩✩

Chubb (CB)

rank #120 • ✭✭✭✭✭✩✩

Six of the Financials sector stocks are trading at a discount to fair value. I own four of the stocks. Only two stocks would be present in a portfolio of the 50 top-ranked stocks.

Health Care

UnitedHealth (UNH)

rank #6 • ✭✭✭✭✭✭✩

CVS Health (CVS)

rank #15 • ✭✭✭✭✭✭✩

Medtronic plc (MDT)

rank #20 • ✭✭✭✭✭✭✩

AmerisourceBergin (ABC)

rank #28 • ✭✭✭✭✭✭✩

Amgen (AMGN)

rank #33 • ✭✭✭✭✭✭✩

Cardinal Health (CAH)

rank #37 • ✭✭✭✭✭✭✩

Quest Diagnostics (DGX)

rank #39 • ✭✭✭✭✭✭✩

Johnson & Johnson (JNJ)

rank #43 • ✭✭✭✭✭✭✩

Pfizer (PFE)

rank #62 • ✭✭✭✭✭✩✩

Stryker (SYK)

rank #68 • ✭✭✭✭✭✩✩

Four of the Health Care sector stocks are trading at a discount to fair value. I own six of the stocks. Eight stocks would be present in a portfolio of the 50 top-ranked stocks.

Industrials

Cummins (CMI)

rank #2 • ✭✭✭✭✭✭✭

Illinois Tool Works (ITW)

rank #12 • ✭✭✭✭✭✭✩

Boeing (BA)

rank #16 • ✭✭✭✭✭✭✩

General Dynamics (GD)

rank #19 • ✭✭✭✭✭✭✩

FedEx (FDX)

rank #23 • ✭✭✭✭✭✭✩

Raytheon (RTN)

rank #26 • ✭✭✭✭✭✭✩

Northrop Grumman (NOC)

rank #29 • ✭✭✭✭✭✭✩

Union Pacific (UNP)

rank #30 • ✭✭✭✭✭✭✩

Lockheed Martin (LMT)

rank #32 • ✭✭✭✭✭✭✩

A.O. Smith (AOS)

rank #35 • ✭✭✭✭✭✭✩

Five of the Industrials sector stocks are trading at a discount to fair value. I own six of the stocks. All ten stocks would be present in a portfolio of the 50 top-ranked stocks.

Information Technology

Texas Instruments (TXN)

rank #8 • ✭✭✭✭✭✭✩

Accenture plc (ACN)

rank #9 • ✭✭✭✭✭✭✩

Cisco Systems (CSCO)

rank #18 • ✭✭✭✭✭✭✩

Apple (AAPL)

rank #21 • ✭✭✭✭✭✭✩

Oracle (ORCL)

rank #22 • ✭✭✭✭✭✭✩

International Business Machines (IBM)

rank #24 • ✭✭✭✭✭✭✩

Microsoft (MSFT)

rank #25 • ✭✭✭✭✭✭✩

Automatic Data Processing (ADP)

rank #44 • ✭✭✭✭✭✩✩

Nvidia (NVDA)

rank #76 • ✭✭✭✭✭✩✩

Paychex (PAYX)

rank #96 • ✭✭✭✭✭✩✩

Only two of the Information Technology sector stocks are trading at a discount to fair value. I own six of the stocks. Eight stocks would be present in a portfolio of the 50 top-ranked stocks

Materials

Westlake Chemical (WLK)

rank #27 • ✭✭✭✭✭✭✩

Ecolab (ECL)

rank #55 • ✭✭✭✭✭✩✩

International Flavors & Fragrances (IFF)

rank #69 • ✭✭✭✭✭✩✩

Air Products and Chemicals (APD)

rank #75 • ✭✭✭✭✭✩✩

Nucor (NUE)

rank #78 • ✭✭✭✭✭✩✩

PPG Industries (PPG)

rank #89 • ✭✭✭✭✭✩✩

Silgan Holdings (SLGN)

rank #104 • ✭✭✭✭✭✩✩

LyondellBasell Industries (LYB)

rank #109 • ✭✭✭✭✭✩✩

Albemarle (ALB)

rank #110 • ✭✭✭✭✭✩✩

Praxair (PX)

rank #119 • ✭✭✭✭✭✩✩

Four of the Materials sector stocks are trading at a discount to fair value. I don't own any of the stocks. Only one stock would be present in a portfolio of the 50 top-ranked stocks.

Real Estate

Public Storage (PSA)

rank #91 • ✭✭✭✭✭✩✩

American Tower (AMT)

rank #113 • ✭✭✭✭✭✩✩

Realty Income (O)

rank #202 • ✭✭✭✭✩✩✩

National Retail Properties (NNN)

rank #203 • ✭✭✭✩✩✩✩

Digital Realty Trust (DLR)

rank #206 • ✭✭✭✩✩✩✩

Tanger Factory Outlet Centers (SKT)

rank #208 • ✭✭✭✩✩✩✩

Federal Realty Investment Trust (FRT)

rank #210 • ✭✭✭✩✩✩✩

Omega Healthcare Investors (OHI)

rank #228 • ✭✭✭✩✩✩✩

Ventas (VTR)

rank #234 • ✭✭✭✩✩✩✩

W.P. Carey (WPC)

rank #237 • ✭✭✭✩✩✩✩

Five of the Real Estate sector stocks are trading at a discount to fair value. I own three of the stocks. No stocks would be present in a portfolio of the 50 top-ranked stocks.

Telecommunication Services

AT&T (T)

rank #79 • ✭✭✭✭✭✩✩

Verizon Communications (VZ)

rank #90 • ✭✭✭✭✭✩✩

Telephone and Data Systems (TDS)

rank #200 • ✭✭✭✭✩✩✩

Only three Telecommunication Services sector stocks are present in the list of 240 CCC stocks. All of them are trading below fair value. I own two of the stocks. No stocks would be present in a portfolio of the 50 top-ranked stocks.

Utilities

NextEra Energy (NEE)

rank #67 • ✭✭✭✭✭✩✩

Consolidated Edison (ED)

rank #112 • ✭✭✭✭✭✩✩

Atmos Energy (ATO)

rank #114 • ✭✭✭✭✭✩✩

Dominion Energy (D)

rank #116 • ✭✭✭✭✩✩✩

WEC Energy (WEC)

rank #123 • ✭✭✭✭✩✩✩

UGI (UGI)

rank #126 • ✭✭✭✭✩✩✩

Xcel Energy (XEL)

rank #142 • ✭✭✭✭✩✩✩

American Electric Power (AEP)

rank #146 • ✭✭✭✭✩✩✩

Eversource Energy (ES)

rank #153 • ✭✭✭✭✩✩✩

MDU Resource (MDU)

rank #154 • ✭✭✭✭✩✩✩

Only one of the Utilities sector stocks is trading at a discount to fair value. I own four of the stocks. No stocks would be present in a portfolio of the 50 top-ranked stocks.

Top 50 Ranked Stocks

In the previous section, I noted the number of stocks in each sector list that would be present in a portfolio of the 50 top-ranked stocks. Here is a chart showing the sector distribution of such a portfolio:

Note that there are no representatives from the Real Estate and Utilities sectors. The top-ranked Real Estate sector stock is PSA, which is ranked #91. The top-ranked Utilities sector stock is NEE, which is ranked #67.

Here's an analysis of these stocks, courtesy of finbox.io:

The 50 top-ranked stocks have returned 22.2% over the last year and have outperformed the S&P 500 by about 48% over the last five years.

Concluding Remarks

I don't own any Materials sector stocks. Seeing a ranked list of Material sector stocks, as presented above, is quite informative. Glancing at the key metrics of discounted stocks, WLK looks interesting despite its low yield. The stock boasts a 5-year DGR of 25%. NUE has a higher yield, but its 5-year DGR is anemic. LYB has the highest yield of the Materials sector stocks and an impressive 5-year DGR of 20%, but the stock has lower safety ratings.

Even for sectors with appropriate coverage, I find it useful to review my positions relative to others I don't own. For example, in the Consumer Staples sector, I don't own SJM, which is trading about 10% below my fair value estimate. The stock yields 3.10% and has a 5-year DGR of 9%. Compare those metrics with WMT's, one of the stocks in my portfolio. WMT yields 2.17% and has a 5-year DGR of only 5%. While I won't exchange WMT for SJM only based on these metrics, perhaps a more comprehensive comparison is in order!

Although I believe my ranking system does a reasonable job ranking most stocks, its ability to rank Real Estate sector stocks relative to stocks in other sectors is suspect. The obvious reason is that Real Estate sector stocks (and specifically REITs) are best evaluated using metrics like NAV (net asset value) and FFO (funds from operations). These metrics are not readily available, and certainly not in the CCC spreadsheet that I use routinely.

I'll be revisiting my ranking system in the next few months to address this shortcoming.

Thanks for reading! If you liked this article and would like to read similar articles in future, please click the Follow link at the top of this article. And, if you're already following me, I sure would appreciate it if you click on the Like button below!

Disclosure: I am/we are long AAPL, AFL, CB, CMCSA, CMI, CSCO, CVS, D, DGX, DIS, ES, GD, HD, HRL, IBM, ITW, JNJ, LMT, LOW, MDT, MO, MSFT, NEE, NKE, NNN, NVDA, O, OHI, PFE, PG, ROST, RTN, SBUX, T, TJX, TROW, TRV, TXN, UNH, UNP, VLO, VZ, WBA, WMT, XEL, XOM.

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.