V - October 2023's Top 10 Dividend Growth Stocks: Your Path To Wealth And Stability

2023-10-18 17:55:01 ET

Summary

• I believe that a well-balanced and broadly diversified portfolio with a reduced risk level is the key to long-term investment success.
• Dividend growth companies are crucial for a well-balanced portfolio, since they can serve as growth drivers for your wealth.
• I will introduce you to 10 dividend growth companies that stand out due to their appealing Valuation, growth perspectives, financial health, and competitive advantages.

Investment Thesis

I strongly believe that the key determinant of long-term investment success is a well-balanced and broadly diversified investment portfolio with a reduced risk level, and which incorporates both high dividend yield and dividend growth companies.

When investing over the long term, dividend growth companies are an essential part of a well-balanced and broadly diversified investment portfolio to build wealth. In order to increase the probability of achieving attractive investment results, you should identify those dividend growth companies that have significant competitive advantages, are profitable, have an attractive Valuation and sufficient growth prospects.

To assist you in identifying and selecting dividend growth companies which I believe are currently attractive for investors, I will present you with my top 10 dividend growth companies to consider investing in during this month of October.

In a previous article , I have already explained the selection process for my top dividend growth companies of the month.

My Top 10 Dividend Growth Companies to invest in for October 2023

• Comcast (NASDAQ: CMCSA )
• Mastercard (NYSE: MA )
• Apple (NASDAQ: AAPL )
• Visa (NYSE: V )
• Royal Bank of Canada (NYSE: RY )
• Bank of America (NYSE: BAC )
• The Home Depot (NYSE: HD )
• McDonald's (NYSE: MCD )
• American Express (NYSE: AXP )
• The Charles Schwab (NYSE: SCHW )

Overview of the selected Dividend Growth Stocks to invest in for October 2023

Source: The Author, data from Seeking Alpha

Mastercard

Mastercard is among my favorite dividend growth companies, and I have lately added the company to The Dividend Income Accelerator Portfolio .

Even though Mastercard’s Valuation is not low, its P/E [FWD] Ratio of 33.58 still stands 11.01% below its Average from the past 5 years, underlying that the company is currently undervalued.

I strongly believe that Mastercard is an excellent pick in terms of growth. This is underscored by its EPS FWD Long-Term Growth Rate [3-5Y CAGR] of 19.58%, which is 117.58% above the Sector Median of 9.00%.

On Wednesday, October 11 ^th , I attended an insightful and engaging webinar held by Steven Cress , the Head of Quantitative Strategies at Seeking Alpha about Seeking Alpha’s Quant Stock Ratings. In this webinar he highlighted the crucial role the EPS FWD Long-Term Growth Rate [3-5Y CAGR] holds for the Seeking Alpha Quant Rating. Analyzing this metric in the context of Mastercard has further raised my confidence in the company’s growth prospects.

Below you can find the Seeking Alpha Growth Grade for Mastercard, reinforcing my belief that Mastercard is a great pick when considering its excellent growth prospective.

Below you can find my latest analysis on Mastercard in which I specify the reasons for which I believe the company is an excellent risk/reward play for investors:

Mastercard: One of the best risk/reward Choices for The Dividend Income Accelerator Portfolio

Apple

Apple is not only the largest position of my private investment portfolio . The company from Cupertino is also the largest position of The Dividend Income Accelerator Portfolio, since I believe it continues to be a highly attractive risk/reward choice for investors.

Apple currently has a P/E [FWD] Ratio of 29.44, which lies slightly above the Sector Median of 24.68. Nevertheless, I strongly believe the company should be rated with a significant premium when comped to its competitors. This is due to its strong competitive advantages. In a previous analysis on Apple, I explained the company's competitive advantages in greater detail. In the same analysis, I further specify the company’s attractiveness in terms of risk/reward.

Below you can find the Seeking Alpha Profitability Grade, which underlines Apple’s financial health.

Bank of America

Bank of America is among the companies I’ve considered incorporating into The Dividend Income Accelerator Portfolio in the following weeks. Different reasons strengthen my belief as to why the company would be an attractive choice for the portfolio.

Bank of America currently has a P/E [FWD] Ratio of 8.09, which stands 13.92% below the Sector Median and lies 31.37% below its Average from the past 5 years. These metrics raise my confidence that the company is undervalued at this moment in time.

With a relatively low Payout Ratio of 25.29%, a current Dividend Yield [FWD] of 3.55%, and a 5 Year Dividend Growth Rate [CAGR] of 12.03%, I further believe that Bank of America perfectly combines dividend income with dividend growth. Therefore, I see the bank as an attractive candidate to be included in The Dividend Income Accelerator Portfolio in the future.

Below you can find Consensus Dividend Estimates for Bank of America. The Consensus Yield stands at 3.40% for 2023, at 3.70% for 2024, and at 4.00% for 2025, reinforcing my theory that the bank is an excellent pick for those looking for dividend income and dividend growth at the same time.

Comcast

Comcast is a company from the Cable and Satellite Industry that was founded in 1963. Today, Comcast has 186,000 employees and a current Market Capitalization of $183.44B.

I believe that Comcast’s Valuation is currently attractive. This is the case due to its P/E [FWD] Ratio standing at 12.73, which is 23.72% below the Sector Median and 25.58% below its Average from the past 5 years.

The results of the Seeking Alpha Quant Ranking strengthen my belief that Comcast is currently an attractive pick for investors. Comcast is ranked 1 ^st out of 13 within the Cable and Satellite Industry, 2 ^nd out of 247 within the Communication Services Sector and 34 ^th out of 4657 within the overall ranking.

The Home Depot

The Home Depot is a home improvement retailer that was founded in 1978. The company currently has a Market Capitalization of $298.07B.

Over the past 5 years, The Home Depot has shown a Dividend Growth Rate [CAGR] of 15.47%, which has strongly contributed to me including the company in this list of dividend growth companies.

With a current P/E [FWD] Ratio of 19.59, which lies 7.65% below its Average from the past 5 years, I see the company as being fairly valued at this moment in time.

I further believe The Home Depot is an appealing choice for investors in terms of Profitability, which is evident by the Seeking Alpha Profitability Grade that you can find below.

McDonald's

McDonald's currently pays a Dividend Yield [FWD] of 2.66% while it has shown a Dividend Growth Rate [CAGR] of 8.52% over the past 5 years. The company’s strength in terms of Dividend Growth is further underlined by its EPS Diluted Growth Rate [FWD] of 10.22%, which stands significantly above the Sector Median of 1.79%.

In addition to the above, I would like to highlight that I see McDonald's as being undervalued. The company’s P/E [FWD] Ratio of 22.04 lies significantly below its Average from the past 5 years (which is 27.47).

I further see McDonald's as an excellent choice in terms of Profitability. This is underscored by its Gross Profit Margin [TTM] of 57.44%, which is above the Sector Median (35.41%) and its Net Income Margin [TTM] of 33.06%, which is also significantly above the Sector Median (4.40%). The Seeking Alpha Profitability Grade provides further confirmation of McDonald's strength in terms of Profitability.

American Express

American Express is also among the companies on my watchlist to be added to The Dividend Income Accelerator Portfolio. In addition to that, it is already one of the largest positions of my personal investment portfolio.

At this moment of writing, American Express pays shareholders a Dividend Yield [FWD] of 1.58% while it has shown a Dividend Growth Rate [CAGR] of 10.01% over the past 5 years. What makes American Express further attractive for dividend growth investors is its low Payout Ratio of 22.79%, which indicates that there is plenty of room for dividend enhancements in the future.

I further believe that American Express is attractive in terms of Valuation: its P/E [FWD] Ratio of 13.64 stands 26.60% below its Average from the past 5 years, clearly indicating that the company is currently undervalued.

The Seeking Alpha Dividend Grades further confirm that American Express is an excellent pick for dividend income and dividend growth investors: the company gets an A rating for Dividend Safety, an A- rating for Dividend Consistency, and a B+ rating for Dividend Growth.

The Charles Schwab Corporation

Since the beginning of 2023, The Charles Schwab Corporation has shown a negative performance of -37.56%.

Today, the company is available for a relatively attractive price level: its P/E [FWD] Ratio currently stands at 18.44, which is 9.33% below its average from the past 5 years, thus supporting my theory that The Charles Schwab Corporation is currently undervalued.

I am convinced the company is an attractive choice in terms of Growth, which is underscored by its EPS Diluted Growth Rate [FWD] of 7.61%, which is above the Sector Median of -0.42% and its EPS FWD Long Term Growth Rate [3-5Y CAGR] of 11.15%, which also stands above the Sector Median (9.00%).

Royal Bank of Canada

Royal Bank of Canada is also among the companies that I’ve already incorporated within The Dividend Income Accelerator Portfolio.

I strongly believe that the Canadian bank is appealing for investors aiming to blend dividend income and dividend growth. At this moment, Royal Bank of Canada pays a Dividend Yield [FWD] of 4.58%, has shown a Dividend Growth Rate 5 Year [CAGR] of 6.24% while having a Payout Ratio of 47.90%.

Below you can find the Seeking Alpha Dividend Grades for Royal Bank of Canada, underlying my thesis that the Canadian bank has a solid dividend: the bank receives an A rating for Dividend Consistency, a B for Dividend Growth and Dividend Safety, and a B- for Dividend Yield.

In the analysis below, I explained in greater detail the reasons behind my decision for including Royal Bank of Canada in The Dividend Income Accelerator Portfolio:

Royal Bank Of Canada: The Fourth Buy For The Dividend Income Accelerator Portfolio

Visa

Visa is another of my favorite dividend growth stocks and the company is also among the largest positions of my private investment portfolio. In addition to that, I plan to include Visa in The Dividend Income Accelerator Portfolio in the future.

In a previous analysis that I conducted about Visa, I listed in greater detail the company's competitive advantages :

"Visa’s reliable payments network, the company’s technological knowledge as well as its broad network within the financial service industry in combination with a strong brand image, protect the company from additional competitors entering the business segment."

I further believe that Visa is an excellent choice for investors when it comes to Profitability. This is underlined by the fact that its Gross Profit Margin [TTM] stands at 97.73% (which is 64.11% above the Sector Median). It is further worth mentioning that the company’s Return on Equity is at 46.51%, being significantly above the Sector Median of 11.37%.

Below you can find the Seeking Alpha Profitability Grades, which underline my thesis that Visa is a great pick in regards to Profitability.

I also believe that Visa’s current Valuation is attractive: its P/E [FWD] Ratio of 28.62 stands below its Average from the past 5 years (32.61), indicating that the company is undervalued at this moment in time.

Conclusion

A well balanced and broad diversified investment portfolio with a reduced risk level is crucial for the success of your investments over the long term. Dividend growth companies play an important role when building a balanced portfolio.

I strongly believe that each of the selected companies I’ve presented in today’s article can help you to steadily increase your wealth when investing over the long term. All of the carefully selected picks have significant competitive advantages, are financially healthy and currently have a relatively attractive Valuation. I further believe that their growth perspectives are attractive.

Some of these picks (Apple, Mastercard and Royal Bank of Canada) are already part of The Dividend Income Accelerator Portfolio. Those companies that are not part of the portfolio but have been included in today’s article are on my radar and I’m actively considering including them in The Dividend Income Accelerator Portfolio.

In addition to that, some of the selected picks are among the largest positions of my personal investment portfolio (American Express, Apple, Mastercard and Visa), underscoring my strong confidence in the company’s business models, competitive advantages, financial health and their future growth potential.

I am convinced that these 10 companies can contribute significantly to not only preserving your capital, but to steadily increasing it when investing with a long-investment horizon and being part of a well-balanced and broad diversified investment portfolio with a reduced risk level. Happy investing!

Author’s note: I would appreciate hearing your opinion on this selection of dividend growth companies. Do you own any of these picks or plan to acquire them? Are any of the selected picks on your watch list? What are currently your favorite dividend growth stocks to consider for your investment portfolio?

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