6 Compounding Machines for Long Term Dividend Investors

These dividend giants will grow your wealth for years to come

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6 Compounding Machines for Long Term Dividend Investors

Earnings per share have doubled over the preceding 7 years to $5.17 in 2012. Quarterly dividends increased from 46 cents per share in 2008 to 94 cents per share by the end of 2013. Currently, the stock is trading at 15.80 times earnings and yields a very sustainable 4.50%. I find current valuation to be a steal for this security. Check my analysis of PMI for more information.

Chevron (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. This dividend champion has rewarded shareholders with a dividend increase for 26 years in a row.

Over the past decade, earnings per share have increased by 12.20% per year, while dividends were raised by 10.60% per year. Currently, the stock is trading at 9.80 times earnings and yields a very sustainable 3.40%. I find current valuation to be attractive. Check my analysis of Chevron for more information.

Target (TGT) operates general merchandise stores in the United States. This dividend champion has rewarded shareholders with a dividend increase for 46 years in a row. Over the past decade, earnings per share have increased by 9% per year, while dividends were raised by 19.80% per year.

Currently, the stock is trading at 16.10 times earnings and yields a very sustainable 2.90%. I am planning on dollar cost averaging my way into Target in 2014, by putting equal dollar amounts every month. Check my analysis of Target for more information.

McDonald’’s  (MCD) franchises and operates McDonald’s restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. This dividend champion has rewarded shareholders with a dividend increase for 38 years in a row.

Over the past decade, earnings per share have increased by 22.60% per year, while dividends were raised by 22.80%/year. Currently, the stock is trading at 17.10 times earnings and yields a very sustainable 3.40%. I find the current valuation to be attractive. Check my analysis of McDonald’’s for more information.

Exxon Mobil (XOM) engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products. This dividend champion has rewarded shareholders with a dividend increase for 31 years in a row.

Over the past decade, earnings per share have increased by 19.70% per year, while dividends were raised by 9.60%/year. Currently, the stock is trading at 13 times earnings and yields a very sustainable 2.50%. I would be more excited about ExxonMobil if it dips below $90, as I find current valuation to be a stretch relative to peers due to Buffett’s investment in the company. Check my analysis of Exxon Mobil for more information.

I did not use a quantitative screen to get to this list. This group of stock is a result of my following 200 – 300 dividend growth companies over the past six years, screening for value every couple of weeks, researching individual companies, and using my judgment to pick those that are compounders.

I believe that successful investing is all about protecting your downside first, and avoiding big mistakes, rather than trying to hit home runs. If you take care of the downside, the upside will take care of itself for the long-term buy and hold investor. I expect to buy and hold dividend compounders for life, although I do monitor my positions regularly.

Therefore, if one of my holdings fails to live up to my expectations and does something like cutting the dividend, I would be putting my hard earned money somewhere else. In addition, I try to dollar cost average my way into positions over time, and attempt to build out a diversified portfolio of income producing securities. In an equally weighted portfolio of 40 individual securities, my compounding won’t suffer if one or two companies fail.


Article printed from InvestorPlace Media, http://investorplace.com/2014/01/dividend-investors-dividend-stocks-ko-mcd-tgt-cvx-xom/.

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