To be deemed a “Dividend Aristocrat,” a company must have a remarkable track record: consistently increasing shareholder dividends every year for at least 20 consecutive years. Such companies tend to command significant investor attention, as tracking funds that follow the Dividend Aristocrats Index must own them. However, amidst the demand for shares, dividend growth stocks can sometimes become “fully priced,” with limited upside to analyst targets.
At ETF Channel, we have scrutinized the underlying holdings of the SPDR S&P Dividend ETF, which tracks the S&P High Yield Dividend Aristocrats Index, and have identified five dividend growth stocks that still exhibit substantial potential upside to the average analyst target price 12 months out. If the analysts’ forecasts hold true, these five dividend growth stocks could yield capital gains in addition to their growing dividend payments.
Stock Analysis
Here is an overview of the five stocks, including their recent share price, average analyst 12-month target price, and the percentage upside to reach the analyst target:
| Stock | Recent Price | Avg. Analyst 12-Mo. Target | % Upside to Target |
|---|---|---|---|
| Air Products & Chemicals Inc (Symbol: APD) | $226.85 | $276.25 | 21.78% |
| 3M Co (Symbol: MMM) | $91.25 | $110.50 | 21.10% |
| Bank OZK (Symbol: OZK) | $42.65 | $50.50 | 18.41% |
| Becton, Dickinson & Co (Symbol: BDX) | $240.76 | $278.92 | 15.85% |
| Lockheed Martin Corp (Symbol: LMT) | $424.07 | $483.73 | 14.07% |
Total Return Potential
The average 12-month analyst targets are only for the share price. Each of these stocks is expected to pay dividends during that holding period. By adding the current yield to the analyst target price upside, we can estimate the 12-month total return potential:
| Stock | Dividend Yield | % Upside to Analyst Target | Implied Total Return Potential |
|---|---|---|---|
| Air Products & Chemicals Inc (Symbol: APD) | 3.12% | 21.78% | 24.9% |
| 3M Co (Symbol: MMM) | 6.62% | 21.10% | 27.72% |
| Bank OZK (Symbol: OZK) | 3.56% | 18.41% | 21.97% |
| Becton, Dickinson & Co (Symbol: BDX) | 1.58% | 15.85% | 17.43% |
| Lockheed Martin Corp (Symbol: LMT) | 2.97% | 14.07% | 17.04% |
Dividend Growth
Another crucial aspect with dividend growth stocks is how much the dividend is growing. We’ve assessed the trailing twelve months worth of dividends collected by shareholders of each of the above five companies, and compared it to the prior trailing twelve months to gauge the growth in dividends:
| Stock | Prior TTM Dividend | TTM Dividend | % Growth |
|---|---|---|---|
| Air Products & Chemicals Inc (Symbol: APD) | $6.48 | $7 | 8.02% |
| 3M Co (Symbol: MMM) | $5.97 | $6.01 | 0.67% |
| Bank OZK (Symbol: OZK) | $1.3 | $1.46 | 12.31% |
| Becton, Dickinson & Co (Symbol: BDX) | $3.49878048780488 | $3.68 | 5.18% |
| Lockheed Martin Corp (Symbol: LMT) | $11.4 | $12.15 | 6.58% |
These five stocks are part of our full Dividend Aristocrats List. The average analyst target price data upon which this article was based is courtesy of data provided by Zacks Investment Research via Quandl.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
