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 higher 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, and but definitely established the fact that they are not a dividend growth investor.
Tracking Yield On Cost
Yield-on-cost (YOC) is simply Current Annual Dividend dividend 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 often 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 select stocks that will be yielding 10% in 10 years at its current yield and dividend growth rate. The results are presented below:
Walgreen Co. (WAG) is the largest U.S. retail drug chain in terms of revenues, this company operates more than 8,000 drug stores throughout the U.S. and Puerto Rico.
Yield: 2.4% | Dividend Growth: 15.8% | 10 Year Yield: 10.3%
ConocoPhillips Co. (NYSE:COP) is one of the largest independent oil and gas exploration and production (E&P) companies in the world, COP spun off its downstream assets in May 2012.
Yield: 4.3% | Dividend Growth: 9.1% | 10 Year Yield: 10.3%
John Wiley & Sons (JW-A) produces print and electronic products, providing content and solutions to customers worldwide.
Yield: 2.5% | Dividend Growth: 15.4% | 10 Year Yield: 10.4%
Norfolk Southern Corp. (NYSE:NSC) operates 20,000 route miles serving 22 eastern states, the District of Columbia, and Ontario, Canada.
Yield: 2.6% | Dividend Growth: 15.0% | 10 Year Yield: 10.5%
Microsoft (NASDAQ:MSFT), the world's largest software company, develops PC software, including the Windows operating system and the Office application suite.
Yield: 3.3% | Dividend Growth: 15.0% | 10 Year Yield: 13.1%
Omega Healthcare Investors Inc. (NYSE:OHI) is a real estate investment trust (REIT) that invests in income-producing healthcare facilities, mainly long-term care facilities located in the United States.
Yield: 5.8% | Dividend Growth: 9.0% | 10 Year Yield: 13.8%
Cracker Barrel Old Country Store (NASDAQ:CBRL) develops and operates the Cracker Barrel Old Country Store restaurant and retail concept in the United States.
Yield: 2.5% | Dividend Growth: 19.3% | 10 Year Yield: 14.4%
Hasbro Inc. (NASDAQ:HAS) broad portfolio of toys, games and entertainment offerings includes brands such as Transformers, Playskool, Monopoly and My Little Pony.
Yield: 3.2% | Dividend Growth: 16.8% | 10 Year Yield: 14.9%
Harris Corporation (NYSE:HRS) focuses on communications equipment for voice, data and video applications for commercial and governmental customers.
Yield: 3.4% | Dividend Growth: 16.9% | 10 Year Yield: 16.0%
Occidental Petroleum Corporation (NYSE:OXY) is of the largest oil and gas companies in the U.S. OXY has global exploration and production operations. Its subsidiary, OxyChem, is one of the largest U.S. merchant marketers of chlorine and caustic soda.
Yield: 3.3% | Dividend Growth: 17.5% | 10 Year Yield: 16.3%
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 220+ 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 COP, NSC, MSFT in my Dividend Growth Portfolio, and long OHI in my High-Yield Portfolio. See a list of all my dividend growth holdings here.
- 10 Dividend Stocks That Gave Me A 20%+ Annualized Return
- All Investments Carry Risk
- 9 Stocks Delivering The Dividend Dream
- 10 Quality Dividend Stocks Trading Below Their Fair Value
- Warren Buffett's Two Investing Rules For Dividend Investors
- High Yield Dividend Stocks in Gurus' Portfolio
- Top dividend stocks of Warren Buffett
- Top dividend stocks of George Soros
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