There are income investors and Dividend Growth investors. While the distinction is rather simple, it slips past many casual observers. Income investors are investing for maximum current income, while dividend growth investors are looking to maximize income over an extended period of time — usually sacrificing current income for potential greater future earnings.
Sometimes when I write about a stock that is yielding 2%, 3% or even 4%, I get a question that goes something like, "Why would you buy that stock when there are better options like 'Amalgamated Risk?' It's currently yielding 7%, 8%, 9% or more!" With this statement the reader has possibly identified themselves as an income investor, but definitely established the fact that they are not a dividend growth investor.
Tracking Yield On CostYield-on-cost (YOC) is simply Current Annual Dividend divided by Original Cost Per Share. YOC not a substitute for calculating an internal rate of return (IRR). The IRR calculation takes into account both capital appreciation and the timing of cash flows (purchases, sells and dividends).
However, as a dividend growth investor, my primary focus is on dividend growth, and since my desired holding period is forever, capital appreciation is little more than an interesting side note.
YOC is much better suited for tracking dividend growth since it is individually tied to a stock and takes into account all the variations of growth rates over time, along with the timing of purchases. Also, it is useful when trying to explain to our income investor brethren why we chose the stock yielding 3% over "Amalgamated Risk" at 8%.
This week, I screened my dividend growth stocks database for stocks that will be yielding 10% in 10 years at current yield and dividend growth rate (based on Monday's close). The results are presented below:
Waste Management Inc. (NYSE:WM) - Waste Management Inc. is the largest U.S. trash hauling/disposal concern.
Yield: 4.8% | Dividend Growth: 7.9% | 10 Year Yield: 10.4%
Walmart Stores Inc. (NYSE:WMT) - Walmart Stores Inc. is the largest retailer in North America and operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets.
Yield: 3.0% | Dividend Growth: 13.3% | 10 Year Yield: 13.3%
Target Corporation (NYSE:TGT) -Target Corp. operates operates about 1,500 Target and 250 SuperTarget general merchandise stores across the U.S.
Yield: 2.4% | Dividend Growth: 17.4% | 10 Year Yield: 11.7%
Avista Corporation (NYSE:AVA) - Avista Corp. generates, transmits and distributes energy as well as engages in energy-related businesses.
Yield: 5.1% | Dividend Growth: 8.8% | 10 Year Yield: 12.0%
Walgreen Co. (WAG) - Walgreen Co. is the largest U.S. retail drug chain in terms of revenues. It operates more than 8,000 drug stores throughout the U.S. and Puerto Rico.
Yield: 2.1% | Dividend Growth: 18.8% | 10 Year Yield: 12.0%
McDonald's Corporation (NYSE:MCD) - McDonald's Corporation is the largest fast-food restaurant company in the world, with about 32,500 restaurants in 117 countries.
Yield: 3.0% | Dividend Growth: 15.0% | 10 Year Yield: 12.0%
AFLAC Incorporated (NYSE:AFL) - Aflac Incorporated provides supplemental health and life insurance in the U.S. and Japan. Products are marketed at work sites and help fill gaps in primary insurance coverage. Approximately 80% of earnings comes from Japan and 20% from the U.S.
Yield: 3.2% | Dividend Growth: 15.0% | 10 Year Yield: 12.9%
Intel Corporation (NASDAQ:INTC) - Intel Corporation is the world's largest manufacturer of microprocessors, the central processing units of PCs, and also produces other semiconductor products.
Yield: 3.9% | Dividend Growth: 13.3% | 10 Year Yield: 13.6%
Lowe's Companies Inc. (NYSE:LOW) - Lowe's Companies Inc. sells retail building materials and supplies, lumber, hardware and appliances through more than 1,700 stores in the U.S. and Canada.
Yield: 2.8% | Dividend Growth: 17.9% | 10 Year Yield: 14.8%
ConocoPhillips Co. (NYSE:COP) - ConocoPhillips Co. was formed in 2002 when Phillips Petroleum and Conoco merged and is now is the fourth largest integrated oil company in the world.
Yield: 4.3% | Dividend Growth: 15.0% | 10 Year Yield: 17.2%
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However, some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long WMT, MCD, INTC, COP. See a list of all my dividend growth holdings here.
- The Elite Dividend Stocks List
- Dividend Stocks Poised To Beat Inflation
- Is It Time To Sell Long-Bonds?
- Stocks That Pay Monthly Dividends
- When To Sell A Dividend Stock
- High Yield Dividend Stocks in Gurus' Portfolio
- Top dividend stocks of Warren Buffett
- Top dividend stocks of George Soros
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