7 Dividend Growth Stocks For May 2022
These investment-grade Dividend Radar stocks would have doubled your investment in three years, based on their 5-year trailing total returns.
In my monthly 7 Dividend Growth Stocks series, I present seven dividend growth stocks from my Dividend Radar watch list for further analysis and possible investment. I use different screens every month to highlight specific elements of dividend growth [DG] investing. For example, income investors prefer stocks with higher yields, while growth-oriented investors favor higher DG rates.
To compile this month's candidates, I considered investment-grade stocks with a 5-year trailing total return [TTR] of at least 26%, which is the rate that would double an investment every three years. Dividend investors focusing on growth and total return will find some high-quality candidates worth consideration.
I ranked candidates that passed my screens using DVK Quality Snapshots and my ranking system.
In case you missed previous articles in this series, here are links to them:
7 Top-Ranked Dividend Growth Stocks for May
Here are the top-ranked DG stocks that passed this month’s screens:
I own the four highlighted stocks in my DivGro portfolio.
Below, I provide a table with key metrics of interest to DG investors:
Yrs: years of consecutive dividend increases
Adj Qual: DVK Quality Snapshots adjusted quality score
Fwd Yield: forward dividend yield for a recent share Price
5-Avg Yield: 5-year average dividend yield
5-DGR: 5-year compound annual growth rate of the dividend
5-YOC: the projected yield on cost after five years of investment
C#: Chowder Number, a popular metric for screening dividend growth stocks
5-TTR: 5-year compound trailing total returns
VL Safety Rank: Value Line's Safety Rank
VL Fin Stren: Value Line's Financial Strength ratings
MS Econ Moat: Morningstar's Economic Moat
S&P Cred Rating: S&P Global's Credit Ratings
SSD Divi Safety: Simply Safe Dividends' Dividend Safety Scores
Buy Below: my risk-adjusted buy below price
–Disc +Prem: discount or premium of the recent share Price to my Buy Below price
Price: recent share price
The Fwd Yield column is colored green if Fwd Yield ≥ 5-Avg Yield.
Key metrics of the 7 Top-Ranked Dividend Growth Stocks this month (includes data sourced from Dividend Radar).
Next, let's look at each stock in turn. All data and charts are courtesy of Portfolio-Insight.com.
Microsoft (MSFT)
Founded in 1975 and based in Redmond, Washington, MSFT is a technology company with worldwide operations. The company’s products include operating systems, cross-device productivity applications, server applications, productivity and business solutions applications, software development tools, video games, and online advertising. MSFT also designs, manufactures, and sells several hardware devices.
MSFT valuation and key metrics, as well as a performance comparison with SPY over the past decade
MSFT is rated Exceptional (quality score: 25), and Portfolio Insight believes the stock has a 1-year upside of 19% with a 1-year target price of $303. MSFT has the highest 5-year TTR of this month’s candidates (38.1%).
MSFT non-GAAP EPS and dividends paid (TTM), with stock price overlay
MSFT’s 5-year dividend growth rate [DGR] is attractive at 9.5%. According to Simply Safe Dividends, the company has ample room to continue paying and raising its dividend, given a payout ratio considered to be “very low for most companies,” according to Simply Safe Dividends.
Costco Wholesale (COST)
Founded in 1976 and based in Issaquah, Washington, COST operates more than 700 membership warehouses in the United States and internationally. The company offers branded and private-label products in a range of merchandise categories. COST also operates gas stations, pharmacies, food courts, optical dispensing centers, photo processing centers, and hearing-aid centers; and engages in the travel business.
COST valuation and key metrics and a performance comparison with SPY over the past decade
COST is rated Excellent (quality score: 24), and Portfolio Insight indicates a 1-year upside of 18% is likely, given a 1-year target price of $508. COST is a Dividend Contender with an 18-year streak of dividend increases.
COST non-GAAP EPS and dividends paid (TTM), with stock price overlay
COST has a solid 5-year DGR of 11.9%. With a payout ratio considered “Very low for most companies,” investors can look forward to more great dividend increases in the future.