7 Dividend Growth Stocks For April 2022
These Defensive Sector stocks in Dividend Radar are likely undervalued and trade below my risk-adjusted Buy Below prices.
Every month, I present seven dividend growth stocks for further analysis and possible investment. I screen stocks in Dividend Radar using different screens every month, highlighting different aspects of dividend growth [DG] investing. For example, income investors prefer stocks with higher yields, while growth-oriented investors favor higher DG rates.
This month, I screened for undervalued stocks in the Defensive Sectors (Consumer Staples, Health Care, and Utilities). Additionally, these stocks trade below my risk-adjusted Buy Below prices. To adjust for risk, I require more significant discounts for stocks with lower quality scores.
I usually rank candidates that passed my screens using DVK Quality Snapshots and my ranking system. Before writing this article, I made a minor adjustment to how quality scores are calculated. I’ll explain the reason for this change below.
In case you missed previous articles in this series, here are links to them:
Screening and Ranking
For this month’s article, I used the following screens:
Stocks in Dividend Radar
Investment Grade stocks (DVK Quality Scores of 15-25)
Only stocks in the Consumer Staples, Health Care, and Utilities sectors
Stocks trading below my risk-adjusted Buy Below prices (see below)
Stocks whose forward dividend yield exceeds the 5-year average dividend yield
My risk-adjusted Buy Below prices allow premium valuations for the highest-quality stocks but require discounted valuations for lower-quality stocks:
7 Top-Ranked Dividend Growth Stocks for April
Here are top-ranked DG stocks that passed this month’s screens:
I own the three highlighted stocks in my DivGro portfolio.
The Fwd Yield column is colored green if Fwd Yield ≥ 5-Avg Yield.
Next, let's look at each stock in turn. All data and charts are courtesy of Portfolio-Insight.com.
Merck (MRK)
Founded in 1891 and headquartered in Kenilworth, New Jersey, MRK is a global health care company that offers health solutions through prescription medicines, vaccines, biologic therapies, and animal health products. MRK markets its products to drug wholesalers and retailers, hospitals, government entities and agencies, physicians, physician distributors, veterinarians, distributors, animal producers, and managed health care providers.
MRK is rated Excellent (quality score: 24) and Portfolio Insight believes the stock has a 1-year upside of 13%. With its yield of 3.19% and a discount of 14% relative to my Buy Below price, I believe the stock is suitable for both income and value investors.
MRK’s 5-year dividend growth rate [DGR] is attractive at 7.7% and the company has ample room to continue paying and raising its dividend, given a payout ratio considered to be “low for most companies”, according to Simply Safe Dividends.
Medtronic plc (MDT)
MDT manufactures and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide. The company operates in four segments: Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group, and Diabetes Group. MDT was founded in 1949 and is headquartered in Dublin, Ireland.
MDT is rated Excellent (quality score: 24) and Portfolio Insight indicates a 1-year upside of 8% is likely. MDT is a Dividend Champion with a 45-year dividend increase streak. Trading at a discount of 10% relative to my Buy Below price, the stock is suitable for value investors seeking a defensive position.
MDT’s 5-year DGR of 8.8% is attractive and with a payout ratio considered “low for most companies”, investors can look forward to more generous dividend increases in the future.