As a dividend growth investor I am always on the lookout for new investing opportunities. The financial blogs and specifically the dividend investing blogs are all teeming with great ideas and inspiration but what I have found is that some dividend stocks are more loved than others. In recent times I have noticed a lot of attention placed on TGT, ESV, ARCP, KMI and the like. While none of the previously mentioned dividend stocks are inherently bad investment choices they do garner a lot of attention on the blog sites. I can certainly understand the allure of those stocks as they are all high yielding by any measure and have stable dividends. However, I wanted to bring to your attention some stocks from my dividend portfolio that some of you may not have heard of or even considered as a dividend growth stock pick for your portfolio. For whatever reason the following dividend stocks all fell under peoples radar.
First, we have Johnson Controls Inc. (JCI), a consumer goods manufacturer that operates in three distinct business sectors (Building Efficiency, Automotive Experience and Power Solutions). I recently wrote about JCI as it was a recent stock purchase of mine in May and I have received several comments from people stating they never looked at or considered JCI. JCI’s building efficiency unit designs, produces, markets, and installs integrated heating, ventilating, and air conditioning systems (HVAC). It’s automotive experience division designs and manufactures interior products and systems for passenger cars and light trucks. If you ever sat in a vehicle, chances are you saw and used a JCI dashboard. Finally, the power solutions segment produces lead-acid automotive batteries and lithium-ion battery technologies for hybrid and electric vehicles. Think all the hype about Tesla’s new battery facility being built. With that being said, JCI is a very good candidate for creating a stock spin off of any one of its divisions.
JCI has a long history of dividend payments going back about 30 years. JCI’s payout ratio is extremely low by any measure at 28.0% which can ensure a dividend payment and even a raise in coming months. Though not a traditional annual dividend grower it does offer a consistent yield now at 2.00%. The PE is a little rich these days at 22.35 but I was light in this sector at only 2.63% of my portfolio and was looking to boost my interest in this space.
Next is W.W. Grainger, Inc. (GWW). W.W. Grainger, Inc. operates as a distributor of maintenance, repair, and operating supplies; and other related products and services that are used by businesses and institutions in the United States and Canada. Basically, think of GWW as your one stop shop for everything needed to run and operate any storefront, warehouse or facility. Need lighting and electrical products, safety equipment, power tools or cleaning supplies think GWW. It’s kind of like a business to business version of Home Depot. GWW is another great long term dividend grower that you rarely read about on the financial blogs. GWW has been raising dividends for well over 40 years yielding a relatively low 1.71% but has an impressive annualized dividend growth rate of over 12.0%. This is what you want to look for if you are a dividend growth investor. It’s about future dividend raises more than current yield. The payout ratio of GWW is low at only 34.2% which allows plenty of room for future dividend raises. The current PE of GWW is 22.2 which is relatively high compared to the S&P but not high relative to its peers.
Following GWW is Bemis Company, Inc. (BMS). BMS manufactures and sells packaging products all over the world for food, medical, pharmaceutical, personal care and electronics. Basically, if you ever unwrapped a candy bar, pulled open a foil lid from your yogurt, opened a bag of salad, ripped open toilet paper or paper towel over-wraps or ate a frozen dinner you used a BMS product. These are the types of companies I just love. The ones you never hear about, yet everyone uses their products every single day. BMS offers a decent yield of 2.70% and has been raising dividends for over 30 years. While not readily discussed on the dividend blogs either BMS does have an impressive dividend growth rate of over 10% annualized. It has a moderate payout ratio of 43.7% which allows for dividend increases in the future. The PE of BMS might be a bit high at 19.94 relative to its peers and the S&P so you may want to wait for a better entry point on this one.
Following BMS I want to talk about CR Bard Inc. (BCR). BCR designs, manufactures, packages, distributes, and sells medical, surgical, diagnostic, and patient care devices worldwide. Not exactly the most exciting industry but what BCR lacks in excitement it more than makes up for in its dividend history and payment. BCR currently yields, and I’ll be the first one to admit it, a low 0.60% which probably explains why it is rarely discussed among the dividend blogs. But, it currently offers a very attractive current PE of under 16 which is below the S&P and its peers and has a very impressive 40+ year history of raising dividends with a annualized growth rate of just under 10%. What BCR lacks in current yield it more than makes up for in its dividend growth. BCR also sports a ridiculously low payout ratio of 10.2% which pretty much means this stock has lots of room for future dividend increases.
Finally, I would like to mention V.F. Corporation (VFC). I have seen VFC mentioned a few times on the dividend blogs but like the aforementioned doesn’t seem to get the recognition as a great dividend investment. For those who are not familiar with VFC you are more than likely familiar with their brands: The North Face, Vans, Timberland, Jansport, Eastpak, lucy, Nautica, Wrangler and Lee jeans to name a few. They also supply officially licensed apparel products for the NFL and MLB. VFC currently yields 1.68% with a relatively low payout ratio of 34.0% which allows it room to grow its dividend. It has raised its dividend for over 40 years and has an annualized dividend growth rate of 9.72%. VFC’s PE currently rests at 22.6 which is low relative to peers but on the high side relative to the S&P.
I can see why some of these dividend aristocrats fly under the radar of many dividend investors: Current yield. But don’t let a low current yield make you miss great annualized dividend growth of around 10% or greater. That’s where the real mojo of dividend stocks comes in. Their dividend growth rates.
All five of these companies mentioned make great long term dividend growth investments. Just make sure you purchase when valuations are more reasonable and of course do you own due diligence.
Disclosure: Long JCI, GWW, BMS, BCR, VFC