Dividend growth investing is the gift that keeps on giving. Except it doesn’t just give more gifts. The gifts it gives grow in number.

Indeed, many high-quality dividend growth stocks have been increasing their dividends for decades. Since inflation means the costs of life are sure to rise, you need to make sure your passive income can keep up.

And when you’re invested in world-class businesses that are raking in ever-more profit and paying out ever-more dividends, you’re sitting pretty.

Plus, because these are world-class businesses, they tend to perform exceptionally well as investments over the long run. Summing it up, we’re talking about safe, growing passive dividend income and exponential growth in wealth.

Of course, some high-quality dividend growth stocks look better than others at any given time. Today, I want to share with you my top five dividend growth stocks for August 2021. Ready? Let’s dig in.

Stock pick #1 for August 2021: Amgen (AMGN)

Amgen is a global biotechnology company.

Amgen has a market cap of $139 billion, so this is a very large healthcare business. And why wouldn’t you want to be exposed to a large business in healthcare? With the world growing larger, older, and wealthier, you will only see more older and wealthier people paying up for access to the best healthcare they can buy. That’s played out in results. Amgen has compounded its revenue at nearly 6% annually over the last decade, while EPS has a CAGR of 13.18% over that period.

As you might imagine, that bottom-line growth has led to a lot of dividend growth.

Amgen has increased its dividend for 11 consecutive years. And their five-year dividend growth rate is 15.2%, which is super impressive. With a payout ratio of only 58.3%, the dividend is easily covered. Plus, the stock yields a rather healthy 2.9%, which is more than twice as high as what the broader market yields.

All of this goodness comes in a fairly inexpensive package.

The P/E ratio is 20. That beats the market. It’s also well off of the stock’s own five-year average P/E ratio, which is slightly over 24. Our recent full analysis and valuation video showed that AMGN could be worth about $262/share. With shares around $240/each right now, this one has some upside on top of the yield, growth, and overall quality.

Stock pick #2 for August 2021: Clorox (CLX)

Clorox is a global manufacturer and marketer of a variety of everyday consumer products.

Clorox owns a number of leading brands, including Brita, Burt’s Bees, Clorox, Glad, and Kingsford. This brand power, combined with the necessity of many of their products, is a powerful one-two punch. They’ve compounded revenue at almost 3% annually over the last decade, while EPS sports a CAGR of nearly 7% over that time frame. They won’t wow you with growth. But this company just steadily moves higher over the decades.

Their dividend has also moved higher over the decades.

Yep. Clorox has increased its dividend for 43 consecutive years. You don’t build that kind of lengthy track record without doing a lot of things right. And with a 10-year DGR of 7.5% that comes along with the stock’s market-beating yield of 2.6%, you’re getting a pretty nice combination of yield and growth here. Their payout ratio, at 64.4%, indicates no trouble whatsoever with the dividend.

With the stock down 10% YTD, this name finally looks appealing again.

Clorox is a stock that’s looked expensive to me for a while now. But after some recent relative underperformance, I’d argue it should definitely be on your radar. The P/CF ratio of 14.2 is quite a bit lower than its own five-year average of 19.3. We put together a full analysis and valuation video on Clorox not long ago, showing that shares could be worth over $193/each. Consider cleaning up on this stock, if you haven’t already.

Stock pick #3 for August 2021: Huntington Ingalls Industries (HII)

Huntington Ingalls is a major American defense company.

With a market cap of $8 billion, this one flies under the radar when compared to a lot of other defense contractors. But don’t let their small size fool you. They pack a serious punch. Revenue has grown at a compound annual rate of 4% over the last 10 years, while EPS grew at a compound annual rate of nearly 25% over the last nine years.

You know what else is growing like crazy? Yep. The dividend.

The dividend, which has been increased for the last nine consecutive years, sports a five-year dividend growth rate of 18.6%. That double-digit dividend growth comes on top of the stock’s market-beating yield of 2.2%. This is a very strong yield-and-growth combination here that is pretty difficult to find elsewhere. And with their low payout ratio of only 27.5%, the dividend is in a great position to continue growing at a high rate for years to come.

Surprisingly, this stock looks undervalued.

It’s up 25% YTD, so the secret is out of the bag a little bit. Still, this name should be a lot higher, in my opinion. Our recent full analysis and valuation video showed that this name could be worth slightly over $232/share. With shares trading hands for $205/each, I see some value here.

Stock pick #4 for August 2021: Johnson & Johnson (JNJ)

Johnson & Johnson is a multinational healthcare conglomerate.

As with Clorox, Johnson & Johnson won’t knock you over the head with humongous growth rates. Instead, this is a classic blue-chip stock that consistently inches higher in the same way the sun rises and sets every day. Revenue has compounded at an annual rate of nearly 3% over the last decade, while their EPS has a CAGR of more than 5% over that time period. What’s more impressive than the size is the consistency. It’s a steady-eddy move upward over time.

That consistency has translated with the dividend.

Johnson & Johnson has increased its dividend for an incredible 59 consecutive years. If you want to sleep well at night knowing that your passive income is going to be there for you in the morning, this is the kind of foundational stock that one can rely on. Their 10-year DGR is 6.5%. The stock yields 2.5%. And the payout ratio is only 44.4%, based on this fiscal year’s guidance for adjusted EPS. Just solid, solid numbers across the board.

This stock is up 10% YTD, but I think there’s more to come.

I’m not saying this stock will make you rich overnight, or even a year from now. This is a long-term investment. You buy Johnson & Johnson because you want to store it away and let it compound for you for the next 30 years. That said, with a forward P/E ratio of 18, based on the midpoint of adjusted EPS guidance for this fiscal year, the stock is relatively inexpensive. And that could be a near-term catalyst for this name to move higher.

Stock pick #5 for August 2021: JPMorgan Chase (JPM)

JPMorgan Chase is a financial holding company.

Well, with $3.5 trillion in assets, I’m underselling it a bit. This is a massive global financial institution with a storied history that dates back to 1799. Even after centuries of doing business, they’re still managing to grow at a rather convincing rate. Their revenue has a CAGR of 2.32% over the last 10 years, while EPS has a CAGR of 7.9% over that time frame. And that’s even after using FY 2020 as the end point for the 10-year comparison, which makes the numbers look a lot worse than they really are. Truth be told, the growth is quite strong.

The dividend growth is also quite strong.

The bank has increased its dividend for 10 consecutive years. And that’s about to be 11, since they’ve pre-announced an upcoming dividend increase. With a five-year DGR of 15.4% and a yield of 2.6%, there’s a lot to like here in terms of both growth and yield. And the dividend remains protected and covered by a low payout ratio of 31.7%.

This stock is up 20% YTD, but the valuation remains very reasonable.

The P/E ratio, at slightly over 10, is ludicrously low. However, earnings are being juiced by the release of loan loss reserves. That said, our full analysis and valuation video, which we put out only weeks ago, reveals how shares could be worth almost $165/each. It’s currently priced at less than $152/share, so I see a favorable gap here between price and value. This is a name that I think dividend growth investors can bank on.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.

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