Sometimes when I write about a stock that is yielding 2%, 3% or even 4%, I get a question that goes something like, "Why would you buy that stock when there are better options like 'Amalgamated Risk?' Its currently yielding 7%, 8%, 9% or more?" With this statement the reader has possibly identified themselves as an income investor, and but definitely established the fact that they are not a dividend growth investor.
Tracking Yield On Cost
Yield-on-cost (YOC) is simply Current Annual Dividend dividend by Original Cost Per Share. YOC not a substitute for calculating an internal rate of return (IRR). The IRR calculation takes into account both capital appreciation and the timing of cash flows (purchases, sells and dividends).However, as a dividend growth investor, my primary focus is on dividend growth and since my desired holding period is forever, capital appreciation is often little more than an interesting side note.
YOC is much better suited for tracking dividend growth since it is individually tied to a stock and takes into account all the variations of growth rates over time, along with the timing of purchases. Also, it is useful when trying to explain to our income investor brethren why we chose the stock yielding 3% over 'Amalgamated Risk' at 8%.
This week, I screened my dividend growth stocks database for select stocks that will be yielding 10% in 10 years at its current yield and dividend growth rate. The results are presented below:
CVS Health Corporation (CVS) is the largest pharmacy health care provider in the U.S.
Yield: 2.5% | Dividend Growth: 17.6% | 10 Year Yield: 12.7%
Phillips 66 (PSX), spun off from ConocoPhillips in 2012, is one of the largest independent refiners and marketers of petroleum products in the U.S. (Includes history from predecessor company).
Yield: 2.7% | Dividend Growth: 15.0% | 10 Year Yield: 10.7%
Cisco Systems, Inc. (CSCO) offers a complete line of routers and switching products that connect and manage communications among local and wide area computer networks employing a variety of protocols.
Yield: 2.8% | Dividend Growth: 15.2% | 10 Year Yield: 10.9%
Cracker Barrel Old Country Store (CBRL) develops and operates the Cracker Barrel Old Country Store restaurant and retail concept in the United States.
Yield: 2.8% | Dividend Growth: 15.0% | 10 Year Yield: 11.2%
Amgen Inc. (AMGN) is one of the world's leading biotech companies with major treatments for anemia, neutropenia, rheumatoid and psoriatic arthritis, psoriasis, cancer and osteoporosis.
Yield: 2.8% | Dividend Growth: 15.0% | 10 Year Yield: 11.3%
Southside Bancshares Inc. (SBSI) owns Southside Bank, which primarily provides financial services to individuals, businesses, municipal entities, and non-profit organizations.
Yield: 3.2% | Dividend Growth: 14.0% | 10 Year Yield: 14.3%
Magellan Midstream Partners LP (MMP) is engaged in the transportation, storage and distribution of refined petroleum products primarily through its 9,600-mile pipeline system.
Yield: 4.8% | Dividend Growth: 8.5% | 10 Year Yield: 10.8%
ONEOK, Inc. (OKE) is an Oklahoma-based natural gas utility with substantial midstream operations through its 2% general partnership interest and large limited partnership interests in a master limited partnership.
Yield: 5.3% | Dividend Growth: 11.0% | 10 Year Yield: 14.5%
Buckeye Partners LP (BPL) is one of the largest independent U.S. pipeline common carriers of refined petroleum products, with over 6,000 miles of pipeline.
Yield: 9.2% | Dividend Growth: 3.4% | 10 Year Yield: 12.6%
Omega Healthcare Investors Inc. (OHI) is a real estate investment trust (REIT) that invests in income-producing healthcare facilities, mainly long-term care facilities located in the United States.
Yield: 10.0% | Dividend Growth: 7.0% | 10 Year Yield: 18.8%
As with past screens, the data presented above is in its raw form. Some of the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 200+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long CVS, CSCO, CBRL, AMGN, OHI. See a list of all my Dividend Growth Portfolio holdings here.
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Tags: CVS, PSX, CSCO, CBRL, AMGN, SBSI, MMP, OKE, BPL, OHI,