Wednesday, April 25, 2018

5 Best U.S. Dividend Growth Stocks

In everything we do, we always want to be the best or be associated with the best. You never hear fans yelling, 'We're number 2, we're number 2', while holding two fingers in the air. The same is true when selecting dividend growth stocks.

This is an article that I started to write several times, but would always stop after getting mired in the details. My natural tendency is make every question an analytical exercise and solve it by modeling and crunching numbers.

This time, I will show some restraint and take a little different approach by relying more on my subjective instincts. To that end, here are my selections for the five best U.S. dividend stocks:

5. Cisco Systems, Inc. (CSCO)
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. This is a relatively new addition to my Dividend Growth Stocks portfolio, with my first purchase occurring in 2013. Since that time the stock has an IRR of 22.2%. Yield: 3.1%

4. Realty Income Corporation (O)
O is an equity real estate investment trust that owns commercial retail real estate properties in the United States. I have held the stock since 2006 and it has done quite well, even in the financial crisis. As an extra bonus, the company pays dividends monthly instead of quarterly. Yield: 5.2%

3. Genuine Parts Company (GPC)
GPC is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. This is a well-managed company that performs well even in a downturn. I first purchased the stock in May 2009 in the low $30's. It is now trading in the high $80's. The share price is not the only thing that has grown. With its increased dividend, the shares I purchased in May 2009 now have an 8.8% yield on cost. Yield: 3.2%

2. 3M Co. (MMM)
MMM is a diversified technology company with a presence in various businesses. This is a company I really like. Problem is so do a lot of other people and institutions. It is a stock you have to watch for the right entry point. I first bought toward the end of the financial crisis in March 2009 when the stock was trading in the high $40's. Unfortunately, after the price increased, I thought there were better opportunities so I sold the stock. Then repurchased it in February 2014 in the $130's. It is now trading in the $210's. Lesson learned. Yield: 2.5%

1. Johnson & Johnson (JNJ)
Johnson & Johnson is a leader in the pharmaceutical, medical device and consumer products industries. This was an easy selection for my top spot. Though not perfect the company has a history of making good decisions and executing on them. Even when the company has a significant problem, such as the Tylenol crisis, management regroups, solves the problem and moves forward. Yield: 2.6%

That's my five best U.S. dividend stocks. These are based on what stocks I believe will perform well as income investments over-time. Some may be not a good buy today, but as a group they are ones that I am always watching. Obviously, there is a great deal of subjectivity in a list like this. I would love to see your five best dividend stocks (doesn't have to be U.S. based.)

Full Disclosure: Long CSCO, O, GPC, MMM, JNJ in my Dividend Growth Stocks Portfolio See a list of all my Dividend Growth Portfolio holdings here.

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