In today’s Dividend Edition, I have two investment ideas for income investors, both of which show hallmarks of being good Dividend Growth Stocks.
I made the case for Dividend Growth Stocks here two weeks ago, read the issue here if you missed it.
In it, I laid out some of the hallmarks of good dividend growth stocks, including a history of dividend growth, increasing cash flow and a low payout ratio.
Today I found two excellent examples of Dividend Growth Stocks from the latest issue of the Dividend Digest (just released Wednesday, click here for more details).
The first candidate meets my most important criteria for finding Dividend Growth Stocks: a strong history of dividend growth.
It’s Sonoco Products Company (SON), which was recommended in the latest Dividend Digest by Vita Nelson of DirectInvesting.com. She wrote:
“Founded in 1899 and once known as the Southern Novelty Company, Sonoco Products is a leading producer of paper-based tubes and cores, flexible packaging, rigid plastic containers, cylinder paperboard, composite cans, protective partitions, wire and cable reels and point-of-purchase displays. ...
“Sales are expected to approach $4.9 billion this year, and consensus estimates called for Sonoco to earn about $2.30 per share in 2013 and to net about $2.52 in 2014, compared with $2.21 in 2012.
“The dividend, which provides a 3.3% yield, has been increased for 31 consecutive years. ... The recent pullback in stock prices offers us an opportunity to buy shares a bit more cheaply.”—Vita Nelson,
www.directinvesting.com, August 17, 2013
SON’s very long history of dividend increases is a sure sign that it will continue to be a good dividend grower as long as its cash flows allow. And the company’s sales growth, reflected by higher estimated EPS over the next two years, suggest that it will have that ability going forward.
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My second idea today also shows great cash flow growth, as well as some of the other hallmarks of good Dividend Growth Stocks: rapid dividend growth in recent years and a low payout ratio.
Here’s the recommendation, from Dow Theory Forecasts Editor Richard Moroney via the latest Dividend Digest:
“Schlumberger (SLB) is a Buy and a Long-Term Buy. [The energy industry supplier] generated $2.35 billion in free cash flow over the last 12 months, versus a negative $590 million one year earlier.
“Management has raised the quarterly dividend at least 10% in each of the past three years after holding it steady during the financial crisis.
“The payout ratio remains below 30%, allowing Schlumberger flexibility to keep growing the dividend. Earlier this year, the company announced plans to repurchase up to $10 billion of shares by June 2018.
At 19 times trailing earnings and 2.5 times sales, shares trade 16% and 18% below their three-year averages.”—Richard J. Moroney, Dow Theory Forecasts, August 26, 2013
Want more great Dividend Growth Stocks like SON and SLB? Just click here to try a trial subscription to my publication, the Dividend Digest.
Wishing you success in your investing and beyond,
Chloe Lutts Jensen
Editor of Investment of the Week
