In a constantly evolving market, the quest for dividend growth stocks continues to be as unpredictable as the stock market itself. The craving for securities that have rapidly grown their dividends in the recent past has intensified and fueled a hunt for stocks that are capable of robust earnings growth in the foreseeable future. This ascent comes with the realization that despite the tantalizing hypergrowth of these stocks, they may not yield high dividends at present, but their potential for quick appreciation is undeniable.

Risk-taking has always been a part and parcel of an investor’s life. With high-growth, comes a contentment to settle for lower current yields. However, there is no permanence in a market that constantly zigs and zags, where a business model can either mature or succumb to new competition and evolving technology. This necessitates a vigilant eye on these high-growth stocks, perhaps even quarterly.

For those starving for higher yields, there is an alternative. The monthly series titled “5 Relatively Safe and Cheap DGI” offers a more moderate to high current income, favoring high-yield names. Dyed-in-the-wool investors understand that investing is not just about chasing high returns but a prudent assessment of the quality of the companies and the price at which they are acquired.

Note: The stocks highlighted are not outright buy recommendations, but fuel for extensive research. A thorough diligence aligned with individual goals and risk tolerance should precede investment decisions. Certain sections in this monthly series might tread familiar ground for avid readers, while serving as introductions to newcomers.

Embracing High Growth Dividend Stocks

A DGI investor can opt for two types of dividend stocks based on their personal situation, goals, and investing time horizon:

High Growth Low Yield [HGLY]

Low Growth High Yield [LGHY]

The HGLY category boasts stocks with a high dividend growth rate but a low current yield, typically accompanied by low payment ratios, manageable debt levels, and soaring earnings.

On the flip side, LGHY-type stocks offer a high current yield (generally 3% and higher) but a lower dividend growth rate, representing more mature and stable businesses.

There are stocks that tend to straddle the line between these two categories, offering a blend of moderate growth and yield.

Who should invest in HGLY-type stocks? Essentially, anyone in the accumulation phase with no immediate need for income, or those with substantial investment capital generating more income than required (e.g., 1.5x or 2x their income needs).

Constructing a Portfolio Based On This Series

While the construction of a portfolio would hinge on personal goals, risk tolerance, investment methodology, there is a suggested approach:

• Allocate a maximum of 20 to 25 stocks over time.
• Divide your capital into 20 equal parts.
• In the first month, acquire 5 to 7 positions based on the top 10 stocks for that month.
• Subsequently, track new entries in the top 10 list and add them according to your process and budget.
• Continue the addition process until you reach 20 (or max) positions.

Upon reaching the limit of 20 or 25 positions, seek new stocks based on your research, considering additions from the monthly list. Replacement of a position requires ejecting an existing one.

Regular monitoring, preferably monthly, or at least quarterly, and preventing an overemphasis on any particular sector or industry segment, is advisable.

Criteria for Selection

Our data set is rooted in the “5 Relatively Safe and Cheap DGI” series, augmented by additional criteria to sift out stocks with high dividend growth potential:

Check the original article for a comprehensive dataset. The primary filtering criteria include:

• Market cap > $10 billion (with exceptions)
• Dividend yield > 1.0% (with exceptions for high quality, low yielders)
• Daily average volume > 100,000
• Dividend growth past five years >= 0 (high growth checked later)
• Preferably, a minimum of 5 years of positive dividend growth.

Following the above filter, a Dividend Safety Quality Score was calculated based on several factors:

• Current Yield
• Dividend growth history
• Payout ratio (preferably based on Free Cash Flow)
• Past five-year and 10-year dividend growth
• EPS growth (average of previous five years of growth and expected next 3-5 years)
• Chowder number – the sum of the 5-yr dividend growth rate and the current yield
• Debt/equity and Debt/asset ratios
• S&P’s credit ratings (Standard & Poor’s Global Ratings)
• Distance from 52-week high (current price

Unearthing High-Growth Dividend Stocks: A Detailed Analysis

Additional Criteria for Dividend Growth Stocks

When seeking out dividend growth investments, the pursuit goes beyond the immediate returns. It often translates to an arduous quest for assets that promise impressive fiscal growth. For investors, the decision to chase high-growth dividend stocks involves applying cautious criteria and employing stringent filters to ensure that the prospective selections stand the test of time.

Amongst the assortment of qualifiers for dividend growth stocks, prominence is placed on consistent dividend payouts as well as periodic raises. Stocks that exhibit steady growth in payouts, or a cumulative increase of 30% over the last five years, rise to the fore.

Narrowing Down the List To 20 Stocks

From an initial pool of 322 stocks, honing in on the perfect twenty involves a meticulous selection process. A nuanced approach that encompasses diverse factors such as high-quality scores, dividend growth rates, and earnings growth forms the bedrock of the whittling-down technique.

Carefully weighing the highest HG-Quality-Scores, past dividend growth rates over 5 and 10 years, as well as EPS and RS ratings is crucial in the pursuit of uncovering the crème de la crème of high-growth dividend stocks.

The Final Selection

After a series of rigorous eliminations, a refined list of 32 stocks emerges. A process marked by the expulsion of underperforming stocks, be it due to a less-than-satisfactory HG-Quality Score or tepid earnings growth. The list stands as a testament to undivided focus and unerring precision — a compendium of high-growth dividend stocks that are poised to enthrall investors with substantial returns.

Monthly Selection of High Growth DGI Stocks – January 2024

Another month, another whirlwind of mergers, acquisitions, and detours. The stock market, akin to a labyrinthian jungle, is a land of opportunity, daring, and sometimes, disappointing ventures. In the latest move, the tides have turned for companies such as PHM, OC, and AVGO – a true testament to the volatility and dynamism inherent in the world of finance. Let’s delve into the conspicuous shifts that are making waves in the investment landscape.

Shifting Sands: The Revised Portfolio

The latest market symphony plays a divergent tune for PHM, LEN, OC, VMC, ARES, AIZ, ICE, CB, BAC, CINF, OSK, PWR, CAT, COST, and TGT. The influential conductor, strategizing high-growth forecasts, has voted to keep INTU, MSFT, AVGO, and NRG while bidding adieu to NXPI, CDW, ORCL, LEN, VMC, CB, BAC, CINF, OSK, PWR, and CAT. This redux reverberates across multiple sectors, ushering in a roster of top 19 high-growth DGI stocks for the month, each name akin to a chapter in a gripping financial narrative.

The Final Flourish: Ten Top High Growth DGI Stocks

In the final act, the selection process unfurls like a vibrant tapestry – a subjective yet calculated endeavor. Diverse representation across sectors is the crescendo, with a concerted effort to present a captivating ensemble of ten stocks for the month. Each carefully chosen stock is a piece in the mosaic, reflecting not just market dynamics, but potential growth trajectories that promise thriving returns in the following weeks. The climax features a medley including AIZ, AVGO, COST, FIX, INTU, MA, MSFT, OC, PCAR, and PHM – a symphony of high-growth potential.

As the tables turn, the previous month’s selection, a bouquet of PHM, LII, AVGO, AIZ, ARES, INTU, PH, MLM, JPM, and UNH, paints a compelling picture. It’s evident that change is the only constant in the ever-evolving financial landscape, with a transient nature that keeps investors perennially on their toes.

Navigating the Past, Charting the Future

Peering through the lens of history, an illuminating journey unfolds. The model portfolio of ten high-growth stocks, meticulously curated, is juxtaposed against the benchmark Vanguard Dividend Appreciation Index Fund ETF and the S&P 500. The ensuing comparison is an instructive prelude, offering insights into performance trajectories over a span of 17 years, echoing the timeless adage that “history often rhymes.” As the curtain falls on past performance analyses, the caveat of caution is underscored – for history, though instructive, does not dictate the future.

The Pendulum Swings: Performance Dynamics

Every month, a meticulous performance comparison unfolds, offering a fascinating juxtaposition of the portfolio against the Vanguard Dividend Appreciation ETF and the S&P 500. In this volatile dance with numbers, the ephemeral nature of monthly performance is a reminder of the mercurial disposition that characterizes the financial realm. Amidst this seesaw, the longue durée of yearly performance calculation weaves a compelling narrative of the evolving investment strategy.

Curtain Call: Concluding Reflections

In this mosaic of high-growth dividend stocks, the canvas is a vibrant panorama, rich with the singular nature of hyper-growth periods and the concurrent diminution of dividend yields. A tantalizing prospect for the discerning investor, the list narrates a tale of discernment and potential – an anthology of high-growth names that beckon the intrepid voyager of the investment landscape. As the rule-based filtering yields its crop, the final selection bears the hallmark of diversity, fortified by unabated growth prospects and manifold values.