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home / news releases / FMC - My Top 15 High Growth Dividend Stocks For September 2023


FMC - My Top 15 High Growth Dividend Stocks For September 2023

2023-09-04 02:08:07 ET

Summary

  • The summer stock market rally ended in August, with the SPDR S&P 500 Trust ETF posting a loss of 1.63%.
  • The top 15 dividend growth stocks for September offer an average dividend yield of 1.86% and appear about 36% undervalued based on dividend yield theory.
  • Since inception, September 2020, the watchlist is beating VIG by 3.91% and SPY by 3.12%.

Quality Stocks

The summer stock market rally had to end sooner or later and it ended last month. The watchlist for August posted a big loss of 4.78%, underperforming both the Vanguard Dividend Appreciation Index Fund ETF Shares ( VIG ) and the SPDR S&P 500 Trust ETF ( SPY ). Year-to-date, the watchlist remains positive with a gain of 12.85%, compared to 8.46% for VIG and 18.65% for SPY.

While SPY continues to outpace my watchlist this year, since inception, the watchlist maintains a respectable level of alpha. The long-term, 36-month, annualized return for my watchlist is 13.63% compared to 9.72% for VIG and 10.51% for SPY.

My goal is not to beat SPY or VIG but to generate a long-term rate of return of at least 12%. Thus far, the watchlist is achieving this goal with 3 full years of history under its belt.

The main focus of this watchlist is to find the best combination of quality companies trading for attractive prices. I believe this is the optimal long-term strategy to build wealth.

The top 15 dividend growth stocks for September offer an average dividend yield of 1.86%. Collectively, they have increased dividend payments at a rate of 29.13% during the last 5 years. Based on dividend yield theory, these 15 stocks are about 36% undervalued right now, and I think they are poised to offer strong long-term returns.

I would recommend two approaches to dividend investing. The first is to dollar-cost average into at least 10-20 or more quality dividend-paying stocks across multiple sectors and industries. By dollar-cost averaging, you eliminate the risk of trying to value a stock and over a long enough period, theoretically, you will buy shares at market highs, lows, and in-between resulting in an average cost basis somewhere in the middle. The second method carries a little more risk. Invest in undervalued stocks, also dollar-cost averaging into at least 10-20 unique quality companies across multiple sectors and industries. The additional risk with this approach comes from the chance that your valuation method proves to be incorrect. However, by investing in multiple unique stocks, the odds that you accurately identify at least a few undervalued stocks increases. The resulting upside from a few correct picks may more than offset the underperformance from the bad ones.

Watchlist Criteria

The criteria used to determine which stocks are included in my high-growth dividend stock watchlist remains unchanged for September 2023. It is made up of the 8 factors listed below that have historically outperformed the broad universe of dividend-paying stocks when analyzed collectively.

  • Market Cap of at least $10 billion.
  • Payout Ratio no greater than 70%.
  • 5-year Dividend Growth rate of at least 5%.
  • 5-year Revenue Growth rate of at least 2%.
  • 5-year EPS Growth rate of at least 2%.
  • S&P Earnings and Dividend Rating of B+ or better.
  • Wide or Narrow Moat (Morningstar).
  • Exemplary or Standard Management Team (Morningstar).

The rules identified 134 stocks for the month that were all ranked based on the above-mentioned metrics with the exclusion of market cap. I then computed the current valuation for each stock using dividend yield theory. All stocks were ranked for both quality and valuation and sorted by the best combination of both. Next, I computed a forecasted rate of return for the next 5-year period for each of the stocks. This return is based on forecasted earnings growth, a return to fair value, and the dividend yield.

The highest-ranked 15 stocks with a forecasted return greater than or equal to 12% were chosen for the watchlist. The long-term hypothesis for this watchlist is that it will outperform a broad quality dividend fund such as Vanguard's Dividend Appreciation ETF, VIG, and that it will generate a 12% annualized rate of total return.

Watchlist For September 2023

Created by Author

Above are the 15 stocks I am considering for further evaluation during the month. They are sorted in descending order by their rank and 5-year dividend growth rate.

The "O/U" column represents potential undervalue; this is a comparison of the current dividend yield to the historical dividend yield as a function of share price.

The expected return in the table above was computed using a discounted 5-year EPS forecast, a return to fair value, and the current dividend yield. There is also a margin of safety built into the forecasted return. These figures are just assumptions based on the available data and there is no guarantee these returns will be attained.

There are 4 changes to the top 15 list from the prior month. Allegion ( ALLE ), Goldman Sachs ( GS ), MarketAxxes Holdings ( MKTX ) and Rollins ( ROL ) have fallen further down the list, or do not meet the 12% expected rate of return threshold and were replaced by Bank of America ( BAC ), Discover Financial Services ( DFS ), Dollar General ( DG ), and Microchip Technology ( MCHP ).

Past Performance

The top 15 list for August posted a loss of 4.78% and sees its long-term alpha over both benchmarks decrease. The long-term annualized rate of return for the watchlist fell from 15.98% last month to 13.63%. My target rate of return is 12%, and despite the volatility in the market this year, I remain optimistic that this watchlist will continue to exceed this goal in the long run.

Month

Top 15

All

VIG

SPY

1 Month

-4.78%

-2.35%

-1.89%

-1.63%

3 Month

9.27%

9.89%

6.94%

8.17%

6 Month

6.24%

6.69%

8.37%

14.50%

1 Year

18.39%

14.18%

12.54%

15.84%

2020

6.27%

6.15%

9.09%

7.94%

2021

33.81%

31.55%

23.75%

28.76%

2022

-8.58%

-15.12%

-9.80%

-18.16%

2023

12.85%

12.35%

8.46%

18.65%

Since Inception

46.72%

33.17%

32.08%

34.95%

Annualized

13.63%

10.02%

9.72%

10.51%

Top 5 past and present watchlist stocks in August 2023:

  • CDW Corporation ( CDW ) +13.20%
  • West Pharma ( WST ) +10.56%
  • TJX Companies ( TJX ) +7.29%
  • Progressive ( PGR ) +5.95%
  • Intuit ( INTU ) +5.88%

None of the top 15 stocks selected for the month of August were amongst the top 5 performing stocks last month. In total, there have been 72 unique dividend stocks selected by this watchlist since September of 2020.

Top 5 Stocks by Total Return since joining the watchlist:

  1. NVIDIA ( NVDA ) +271.32% (29 months).
  2. Automatic Data Processing ( ADP ) +94.62% (36 months).
  3. CDW Corporation ( CDW ) +65.37% (31 months).
  4. KLA Corporation ( KLAC ) +64.17% (28 months).
  5. Cintas ( CTAS ) +62.84% (31 months).

Since not all stocks have been on the watchlist for the full 36 months of its existence, comparing a monthly average return can help normalize the results. Here are the top 5 stocks with the highest average monthly return since joining the watchlist.

  1. NVIDIA +4.63% (29 months)
  2. Microchip Technologies +3.01% (3 months)
  3. EOG Resources ( EOG ) +2.58% (6 months)
  4. Zoetis (ZTS) +2.09% (7 months)
  5. Automatic Data Processing +1.87% (36 months)

Drivers Of Alpha

The watchlist underperformed VIG in August. Four watchlist stocks outpaced the ETF last month.

  • ((ZTS)) +1.29%
  • ( WRB ) +0.28%
  • (MSCI) -0.56%
  • ( SSNC ) -1.01%

The remaining 11 stocks underperformed VIG.

Total Return For All Watchlist Stocks

Here are the total returns for all past and present watchlist stocks since first appearing on the watchlist. Out of the 72 stocks that are on this list, 54 (57 last month) have positive total returns and 18 have negative total returns, the average return is 21.87% (23.91% last month). The watchlist has been around for 36 months, the average duration for all 72 stocks is 27.83 months.

Symbol

Since Joining

Count

NVDA

271.32%

29

ADP

94.62%

36

CDW

65.37%

31

KLAC

64.17%

28

CTAS

62.84%

31

AMAT

61.73%

31

TSCO

60.94%

31

INTU

59.85%

36

PGR

56.74%

31

TJX

51.01%

31

COST

50.63%

36

MSCI

49.54%

36

LRCX

49.47%

31

MSFT

49.20%

36

UNH

47.86%

31

APH

45.15%

31

WST

44.28%

36

MPWR

41.59%

30

GGG

40.92%

36

LOW

40.64%

36

ACN

40.62%

36

BK

39.04%

36

EXPD

34.04%

31

NOC

32.23%

36

ROL

31.15%

19

LMT

30.63%

36

FDS

27.89%

36

FAST

27.51%

36

HD

25.15%

36

HUM

23.69%

30

CMCSA

23.20%

36

BBY

22.85%

14

TMO

22.68%

29

JPM

22.10%

31

DE

21.55%

21

FDX

21.20%

18

SHW

20.78%

31

BLK

20.64%

36

CI

19.16%

18

ROP

18.79%

36

SCHW

18.68%

31

V

18.37%

36

MCO

17.58%

36

MA

17.09%

36

EOG

16.49%

6

ZTS

15.62%

7

ICE

10.42%

31

MCHP

9.30%

3

TXN

8.39%

31

BX

7.99%

13

USB

4.52%

34

ATVI

2.57%

28

NTRS

1.55%

36

MS

0.77%

27

WRB

-0.44%

5

KR

-0.71%

2

JKHY

-1.95%

36

DPZ

-2.15%

36

ALLE

-5.17%

2

GS

-7.27%

25

TROW

-9.66%

36

SSNC

-10.62%

30

SBUX

-13.41%

20

LAD

-19.88%

29

SWKS

-27.05%

20

FMC

-27.88%

15

DG

-30.23%

29

SIRI

-31.73%

17

BALL

-42.11%

20

MKTX

-54.41%

31

AAP

-58.82%

14

PARA

-64.24%

26

Dividend Analysis for New Stocks

Below are a 7-year dividend yield theory chart, a dividend history chart, and a dividend growth table for the 4 new stocks on the watchlist this month.

First up is Bank of America.

Created by Author

Created by Author

Year
Dividend
Growth
CAGR
2023
0.96
11.63%
2022
0.86
10.26%
11.63%
2021
0.78
8.33%
10.94%
2020
0.72
9.09%
10.06%
2019
0.66
22.22%
9.82%
2018
0.54
38.46%
12.20%
2017
0.39
56.00%
16.20%
2016
0.25
25.00%
21.19%
2015
0.20
66.67%
21.66%
2014
0.12
200.00%
25.99%
2013
0.04
0.00%
37.41%
2012
0.04
0.00%
33.50%
2011
0.04

30.32%

Up next is Discover Financial Services.

Created by Author

Created by Author

Year
Dividend
Growth
CAGR
2023
2.80
21.74%
2022
2.30
22.34%
21.74%
2021
1.88
6.82%
22.04%
2020
1.76
4.76%
16.74%
2019
1.68
12.00%
13.62%
2018
1.50
15.38%
13.30%
2017
1.30
12.07%
13.64%
2016
1.16
7.41%
13.42%
2015
1.08
17.39%
12.65%
2014
0.92
53.33%
13.16%
2013
0.60
36.36%
16.65%
2012
0.44
57.14%
18.32%
2011
0.28
21.15%

Up next is Dollar General.

Created by Author

Created by Author

Year
Dividend
Growth
CAGR
2023
2.36
14.01%
2022
2.07
27.78%
14.01%
2021
1.62
15.71%
20.70%
2020
1.40
12.00%
19.01%
2019
1.25
10.62%
17.22%
2018
1.13
44.87%
15.87%
2017
0.78
-22.00%
20.26%
2016
1.00
13.64%
13.05%
2015
0.88
13.12%
2014
2013
2012
2011

For further details see:

My Top 15 High Growth Dividend Stocks For September 2023
Stock Information

Company Name: FMC Corporation
Stock Symbol: FMC
Market: NYSE
Website: fmc.com

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