I’ve said it before. I’ll say it yet again. Short-term volatility is a long-term opportunity. Well, volatility has been off the charts this year. And so opportunities are everywhere.
And that’s especially true among high-quality dividend growth stocks. These are some of the best stocks in the market.
They represent equity in world-class enterprises demonstrating how great they are by paying reliable, rising dividends to their shareholders. It’s ever-more cash in hand. Proof in the “profit pudding”, you might say.
I’ve been investing in high-quality dividend growth stocks for more than a decade now, .
And I’ve been particularly aggressive with capital deployment when volatility has been elevated, like now. That’s because valuations have been low.
And lower valuation means higher yield, greater long-term total return potential, and reduced risk. Buying the right stocks at the right valuations helped me to go from below broke at age 27 to financially free at 33.
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 are, not every dividend growth stock is a good buy at every time. Focusing on the very best long-term ideas right now is what this video is all about.
Today, I want to tell you my top five dividend growth stocks for July 2022. Ready? Let’s dig in.
My first dividend growth stock pick for July 2022 is Comcast Corporation (CMCSA).
Comcast is a media and entertainment conglomerate.
Comcast gets a bad rep as some kind of dying company. Are people “cutting the cord”? You betcha. However, Comcast is more than making up for video losses with gains in broadband. With access to high-speed internet more important than ever, that bodes well. And, you know, that’s almost beside the point. The real point is, Comcast is a massive company with interests that extend far beyond basic cable television. This is why they’ve been able to post up a 7.1% CAGR for revenue and an 11.5% CAGR for EPS over the last decade.
Double-digit bottom-line growth has, unsurprisingly, led to similar dividend growth.
The conglomerate has increased its dividend for 15 consecutive years, with a 10-year DGR of 16.3%. Nothing dying about the dividend or the growth of the dividend, that’s for sure. Further proving that point is the fact that the payout ratio of 34.8% shows us an extremely healthy dividend with plenty of room for continued growth. If all of that isn’t good enough, the stock also offers a 2.7% yield. Good dividend metrics here across the board.
When stocks go on huge runs and become expensive, I can be quite unenthusiastic. However, when they get beaten down and become cheap? That’s when my mood turns into one that’s far more sanguine. This is especially true when the business is holding up and it’s simply a case of the stock becoming unpopular for whatever reason. Indeed, Comcast the business is doing well. But the stock?
It’s down more than 20% this year, more or less tracking the broader market. I think this disconnect has created a rather favorable valuation. We’re right now putting content together on a full analysis and valuation video for Comcast, and the video will explain why shares could be worth $57.77/each. With the stock currently priced at less than $40, I see a lot of upside potential here with this name. Take a good look at it.
My second dividend growth stock pick for July 2022 is Essex Property Trust (ESS).
Essex Property Trust is a real estate investment trust that owns and manages apartment communities.
This is a great business that offers a simple investment case. We’re talking about shelter here. A basic need in life. Now, we can quibble about luxury and how far above and beyond a basic need a luxurious apartment is. But at the end of the day, we all need somewhere to live. This is why I love apartment REITs, in general. What makes Essex Property Trust special is their market advantage.
And I’ve already spelled that out in another video that will go live soon, if it hasn’t already. Also, in that video, you’ll see how well this REIT has been managed, which has spelled out solid growth for years and years. Revenue has compounded at 11.5% annually over the last decade, while funds from operations per share has compounded at 8.5% annually.
Another thing special about Essex Property Trust? The dividend.
It’s the only apartment REIT that is a Dividend Aristocrat. In fact, it’s one of the very few Dividend Aristocrat REITs, period. The dividend has been increased for 28 consecutive years. The 10-year DGR is 7.2%. And you’re pairing that high-single-digit dividend growth rate with a yield of 3.4%. That combination of yield and growth is right in the sweet spot for me. Plus, with a payout ratio of 63.1%, we have one of the healthier payouts in all of REITdom.
As I noted earlier, our upcoming video will be doing a deep dive into the business. And in that video, you’ll see why the valuation is so appealing. But I’ll lay it out again. The P/CF ratio is 16.6 right now. The stock’s own five-year average P/CF ratio is 21.7. That’s a pretty severe disconnect on the cash flow multiple, which would seem to indicate some kind of weakness in the business to warrant the discount. Yet there’s been no weakness in the business.
Their most recent quarter – Q1 FY 2022 – showed an increase in the guidance for FFO per share, same-property revenue growth, and same-property net operating income growth. The business has been getting stronger, even while the stock, with its 26% dive YTD, has been getting weaker. I’ve been personally buying this stock recently. You may want to consider doing the same.
My third dividend growth stock pick for July 2022 is Medtronic PLC (MDT).
Medtronic is a global developer and manufacturer of medical devices for chronic diseases.
I love the healthcare space. It’s secular growth. You have an ever-expanding circle of potential customers, since the world continues to get bigger, older, and wealthier. I can’t imagine any future in which more older and wealthier people will be demanding less quality healthcare. It’s nonsensical to think that way. Medtronic is a great business that has been doing well for years, evidenced by their 7.5% CAGR of revenue and 5.7% CAGR of EPS over the last decade. And I think they stand to do even better in the years ahead, making a great business greater.
That goes for the dividend, too, which is already great.
This Dividend Aristocrat has increased its dividend for 45 consecutive years. That’s longer than I’ve been alive for. The 10-year DGR is 10%. And the yield is sitting at 3% right now. By the way, this is not a stock that often offers a 3% yield. Its five-year average yield is only 2.1%. And since the payout ratio is a moderate 48.7%, based on midpoint guidance for this fiscal year’s adjusted EPS, I see this Dividend Aristocrat doing more Dividend Aristocrat things.
This stock is more than 30% off of its 52-week high, and I think it’s become far too cheap.
It’s weird how fast the market can change. For years and years, Medtronic seemed to defy gravity. It pretty much always commanded high multiples, and a lot of investors lusted after it. But that’s been flipped on its head since the pandemic hit, which affected Medtronic by temporarily reducing demand for elective surgeries. The stock is now available for low multiples, yet nobody seems to want it now. Well, except me, of course. I very much like Medtronic here.
We put together a full analysis and valuation video on the business, which will likely be live before this video comes out, and that video shows why the business could be worth $120.99/share. The stock is currently priced around $90. Medtronic used to be chronically expensive. It’s now cheap. And it might be a good idea to take advantage of this flip.
My fourth dividend growth stock pick for July 2022 is T. Rowe Price Group (TROW).
T. Rowe Price is a large investment management company.
I’ve frequently discussed why the asset management business is so lucrative. Global capital markets are the rising tide lifting all boats located in the tide. And being one of the world’s largest asset management companies, T. Rowe Price may as well be operating a battleship in the tide. They benefit disproportionately from their scale. And so do their shareholders. The company’s revenue has a CAGR of 11% over the last decade, while its EPS has a CAGR of 16.3%. Fantastic growth.
Also growing fantastically is the dividend.
Yet another Dividend Aristocrat on today’s list, T. Rowe Price has increased its dividend for 36 consecutive years. The 10-year DGR is 13.3%, which easily beats inflation – even in this inflationary environment. Usually, when you get a growth rate that high, you have to sacrifice yield. But not in this case.
Want a great deal on a great stock? Well, here you go.
This high-quality Dividend Aristocrat looks cheap from every single angle, including the single-digit P/E ratio. I never thought I’d live to see the day when this stock would command an earnings multiple below 10 outside of a major recession. We recently highlighted this stock in a full analysis and valuation video, estimating intrinsic value for the business at $155.40/share. With the stock treading around the $120 level, it looks severely undervalued. It’s hard to pass up T. Rowe Price here. So why do it?
My fifth dividend growth stock pick for July 2022 is VF Corp. (VFC).
VF is a worldwide apparel and footwear company.
Apparel and footwear is something we all need. And so there’s built-in demand for what VF sells. But what elevates VF is their brands. They have some of best brands in their respective niches. Vans, The North Face, Timberland, and Supreme. Terrific brands tend to lead to terrific results over the long term, even if the last two or so years was rough for VF (along with plenty of other companies).
Admittedly, revenue has compounded at less than 1% annually over the last decade, while EPS sports a CAGR of less than 3% over that same time period. But a lot of this was due to a large spin-off that was completed right before the pandemic hit. A double whammy for sure. However, it’s the future growth that matters most. And the near-term forecast for the company’s EPS growth is well into the double digits.
That recovery and growth should keep this dividend growth machine fueled for years to come.
And what a machine it’s been. The company has increased its dividend for 49 consecutive years. Yes, we have another Dividend Aristocrat on today’s list. We’re spoilt for choice when Dividend Aristocrats left and right are on sale. This stock now yields 4.2%, which is practically unheard of for this name. That’s 180 basis points higher than its own five-year average yield.
This stock has been beaten like a drum over the last year, but all that’s done is make the valuation as compelling as I’ve ever seen it.
The stock is down by 40% over the last year. Not as bad as some of the high-flying, no-profit “innovation” stocks out there, sure. But to see a profitable Dividend Aristocrat fall like this over a short period of time is a rare, rare sight. Of course, what’s happened is that the valuation has been compressed to a level that I’ve never really seen before.
We actually put together a full analysis and valuation video highlighting the appeal of VF right now, and that video shows why the business could be worth $65.78/share. That video should be going live very soon. With the stock sitting at right about $48 right now, we’re looking at a significant amount of potential undervaluation. Great business, great brands, great yield, and great valuation. This name should absolutely be on your radar, if not in your portfolio.
— 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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