My Top 5 Dividend Growth Stocks For March 2022

I’ve been exchanging depreciating dollars for appreciating assets for the last 10+ years. The dollar is worth less than it was 10 years ago. It’ll be worth less 10 years from now.

But the businesses I invested in 10 years ago? Worth much, much more now. And they’ll likely continue to be worth much more for years into the future.

But that’s not even the real story. The real story is the safe, growing dividend income I collect from these businesses as a shareholder. That’s because I buy high-quality dividend growth stocks.

These stocks represent equity in world-class enterprises with lengthy track records of consistently increasing dividends. These are stocks that pay reliable, rising dividends, funded from reliable, rising profits.

The dividend growth investing strategy is so powerful, it helped me to retire in my early 30s. I went from below broke at age 27 to financially free at 33. The totally passive dividend income I collect is enough to cover my bills.

By the way, I explain exactly how I achieved financial freedom in just six years in my Early Retirement Blueprint. If you’re interested, you can download a free copy of my Early Retirement Blueprint here.

As great as these stocks can be, though, not every dividend growth stock is a good buy at every time. Focusing on the best long-term opportunities right now is what this video is all about.

Today, I want to tell you my top five dividend growth stocks for March 2022. Ready? Let’s dig in.

Dividend Growth Stock Pick #1 for March 2022: Air Products & Chemicals (APD).

Air Products & Chemicals is a major global producer and supplier of industrial gases.

Most of the stuff we use every single day has to get manufactured. And the manufacturing processes usually require industrial gases. It’s low-cost but necessary input. And if you want a reliable source of gases, you only have a few choices – Air Products & Chemicals, with its $53 billion market cap, operates as part of a global oligopoly.

This is why it’s not surprising to see solid top-line and bottom-line growth. While revenue has a CAGR of 0.8% over the last decade, that’s largely because of restructuring. EPS has a CAGR of 6.3% over that period.

Solid business growth. Even better dividend growth.

This is a vaunted Dividend Aristocrat, with 40 consecutive years of dividend increases. In fact, they increased their dividend only days ago, marking that 40th consecutive year. The 10-year dividend growth rate of 10.1% is great and easily beats inflation, even with inflation running hot right now.

And the stock also yields a market-beating 2.7%, which is 50 basis points higher than its own five-year average. The dividend is also covered by a payout ratio of 62.9%, based on the midpoint of guidance for this fiscal year’s adjusted EPS. So this Dividend Aristocrat is going to keep doing Dividend Aristocrat things.

The stock is down 24% from its 52-week high. And it now looks extremely undervalued.

This isn’t some speculative, unprofitable, so-called “innovation” stock that was in a bubble. This is a Dividend Aristocrat doing over $2 billion/year in net income. But that hasn’t stopped the stock from getting caught up in the deflating of bubbles elsewhere. Nonetheless, this only made the stock that much more appealing for long-term investors who can understand the difference between price and value.

We recently put together a full analysis and valuation video on Air Products & Chemicals, showing why shares could be worth almost $343/each. The stock’s price is at about $240 right now. So a big difference between that price and the potential fair value. And that’s just what you want to see if you’re accumulating shares.

Dividend Growth Stock Pick #2 for March 2022: BlackRock (BLK).

BlackRock is a multinational investment management corporation.

This $114 billion (by market cap) asset manager is truly a behemoth. It has an astounding $10 trillion in assets under management, making them the largest asset manager in the world. They have scale where scale really matters.

Their throne at the top of the heap has resulted in revenue growing at a compound annual rate of 8.5% and earnings per share compounding at an annual rate of 12% over the last 10 years. Their fee base, which is AUM, is massive and growing. The higher the fee base, the higher the fees.

What do higher fees mean? More profit and a bigger dividend.

Indeed, BlackRock has increased its dividend for 13 consecutive years. The 10-year dividend growth rate of 11.6% is solid in and of itself. However, what’s particularly impressive here is the fact that the dividend growth rate has shown acceleration. The most recent dividend increase came in at over 18%.

Meantime, the stock offers a market-beating yield of 2.6% to go along with all of that double-digit dividend growth. And with a payout ratio of only 51.9%, showing an almost perfect balance between retaining earnings for internal growth and returning money back to shareholders, the dividend is positioned to continue growing at least as fast as the business.

The stock is more than 20% off of its 52-week high, and I think that drop has created an attractive long-term entry point.

More than $200/share has been shaved off of the business since early November. We’re talking billions of dollars in market cap. While that’s a bummer for those who bought at the high, it could be a gift for those who didn’t. We recently put together a full analysis and valuation video on this world-class company, showing why shares could be worth over $1,000/each.

With BlackRock trading hands for about $750/share, there could be tremendous upside here. While you wait for that upside to unfold, you’re collecting a market-beating yield growing at a double-digit rate. Not much to dislike here.

Dividend Growth Stock Pick #3 for March 2022: Starbucks (SBUX).

Starbucks is the world’s leading retailer of high-quality, specialty coffee products.

This is an amazing company. Starts of as a coffee shop. Turns into a $106 billion (by market cap) QSR machine. Unreal. And with the pandemic-related lockdowns unfortunately taking out a lot of small businesses, like local coffee shops, Starbucks is arguably in a better competitive position than ever before.

The company has compounded its revenue at an annual rate of 9.1% and its EPS at an annual rate of 16.4% over the last 10 years. That is very, very impressive top-line and bottom-line growth.

Also very, very impressive is the dividend growth.

The 10-year dividend growth rate is a jaw-dropping 20.7%. Even with inflation running hot, Starbucks shareholders are still seeing their purchasing power increase. The company has increased its dividend for 12 consecutive years. But with a moderate payout ratio of only 52.8%, they’re just getting started with the dividend raises – even after all of that double-digit dividend growth. On top of this, the stock yields 2.1%.

This company has one of the biggest and best brands in the world, and the recent weakness could be your opening to get in on it.

Starbucks continues to execute well as a business, yet the stock is down 21% this year alone. There’s a disconnect between the business and the stock. And as a long-term investor who continues to accumulate, I love these short-term disconnects. Our full analysis and valuation video on Starbucks reveals why it’s so compelling and why it could be worth almost $110/share.

Cheap stocks can get cheaper. Even though this stock looks significantly undervalued right now, it could become even more so. That said, I find it highly unlikely that anyone investing in Starbucks here will be unhappy with their capital gain and aggregate dividend income collected a decade from now. Take a look at Starbucks, if you haven’t already.

Dividend Growth Stock Pick #4 for March 2022: Travelers (TRV).

Travelers is a property-casualty insurance company.

As I’ve said many times before, I absolutely love the insurance business model. Most business models make money by selling products and/or services. Insurance does this. But then they also make money through the float that’s built by the time delay between collecting premiums and paying out on claims.

In fact, a lot of insurance companies make even more money from investing the float than from selling insurance. This is why $42 billion (by market cap) Travelers has consistently grown the business like clockwork. Revenue has a CAGR of 3.4% over the last decade, while EPS has a CAGR of 9.2% over that time period.

Also growing like clockwork is the company’s dividend.

Travelers has increased its dividend for 17 consecutive years. And I have no doubt that they’ll continue to increase the dividend for many years to come. Their 10-year dividend growth rate of 8.2% lines up pretty well against EPS growth over that same time frame. You’re layering that dividend growth on top of the stock’s starting yield of 2.0%. And with a low payout ratio of only 24.7%, the dividend is set up to head a lot higher from here.

This is a rare stock that’s actually up on the year, but it still looks modestly undervalued.

Travelers flies under the radar. But they’re set up well right now. First, with the market so volatile right now, there’s a flight to safety. I think that’s why this stock is up 11% on the year at the same time as a lot of high-flying tech stuff is way down on the year. Second, interest rates are set to rise this year.

And that benefits this company through the additional net investment income they can earn from their $80+ billion investment portfolio. We put out a video not long ago on Travelers, analyzing and valuing the business. The final valuation estimate came out to slightly over $178/share. The stock’s price is a bit below that level. And with rising rates upon us, Travelers is a pretty good way to play that.

Dividend Growth Stock Pick #5 for March 2022: Williams-Sonoma (WSM).

Williams-Sonoma is a multi-channel retailer of high-quality home products and furnishings.

This $11 billion (by market cap) retailer has figured it out. They meet the customer wherever they want to be met with the products they want to buy. More than half of the company’s sales have been through the e-commerce channel for years, which positioned them incredibly well heading into a pandemic.

And they’ve taken full advantage of their competitive position. This shows up in the growth of the business. They’ve grown revenue at a compound annual rate of 7.0% and EPS at a compound annual rate of 16.3% over the last decade. Really impressive business growth.

The dividend has also grown at an impressive rate.

That’s right. The 10-year dividend growth rate is 13.9%. Inflation, which is all over the news, is running at about 7% right now. Williams-Sonoma is growing their dividend at twice that rate. The stock also yields 2.0%, which beats the market. If you can beat the market on yield and inflation on growth, you’re off to a great start. Even after all of that double-digit dividend growth, the payout ratio is only at 21.4%. That’s extremely low, giving the company a lot of leeway in terms of future divided raises.

This stock has been absolutely hammered – down 35% from its 52-week high. And it looks buyable again for the first time in a while.

The stock probably got ahead of itself as it ran up well past the $200 mark. But down here at around $144? I see that pricing as significantly more advantageous when you compare it to what the business is likely worth.

On that front, we’ll be putting out a video very soon fully analyzing this high-quality retailer and showing why the shares are potentially worth almost $196/each. Based on the current price, shares are potentially 46% undervalued. With that kind of gap between price and estimated intrinsic value, this might be one of the most undervalued dividend growth stocks out there.

— 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.