JTo become a “dividend aristocrat,” a dividend-paying company must accomplish an incredible feat: consistently increasing shareholder dividends every year for at least 20 consecutive years. Companies with this kind of track record tend to get a lot of investor attention – and additionally, “trailer” funds that track the Dividend Aristocrats Index to have to own them. With all this demand for equities, dividend growth stocks can sometimes become “fully priced” where there isn’t much upside for analysts’ goals.
But we here at ETF channel looked at the underlying holdings of the SPDR S&P Dividend ETF (which tracks the S&P High Yield Dividend Aristocrats Index) and found these five dividend growth stocks that still have a fairly substantial upside to analysts’ average target price on 12 months. Which means that, if analysts are right, these are five dividend growth stocks that could produce capital gains on top of their growing dividend payouts.
In the first table below, we present the five stocks. The stock’s recent price, 12-month average analyst target price, and percentage upside to hit the analysts’ target are shown.
| Store | Recent Price | Avg. 12-MB Analyst. Target | % increase over target |
|---|---|---|---|
| Exxon Mobil Corp (Symbol: XOM) | $87.19 | $99.30 | 13.89% |
| International Business Machines Corp (Symbol: IBM) | $131.64 | $146.50 | 11.29% |
| Sonoco Products Co. (Symbol: SON) | $61.20 | $66.20 | 8.17% |
| Cullen/Frost Bankers, Inc. (Symbol: CFR) | $127.75 | $138.00 | 8.02% |
| McDonald’s Corp (symbol: MCD) | $260.64 | $281.30 | 7.93% |
Analysts’ 12-month average targets are only targets for share price however, and each of these stocks is expected to pay dividends during this holding period – so the full return if these stocks meet their analyst targets, it is actually the rise in the share price seen by analysts more the dividend yield that shareholders can expect. To estimate this total return potential, we added the current yield to the upside of the analyst’s target price, to arrive at the 12-month total return potential:
| Store | Dividend yield | % upside from analyst’s target | Implicit Total Return potential |
|---|---|---|---|
| Exxon Mobil Corp (Symbol: XOM) | 4.04% | 13.89% | 17.93% |
| International Business Machines Corp (Symbol: IBM) | 5.01% | 11.29% | 16.3% |
| Sonoco Products Co. (Symbol: SON) | 3.20% | 8.17% | 11.37% |
| Cullen/Frost Bankers, Inc. (Symbol: CFR) | 2.72% | 8.02% | 10.74% |
| McDonald’s Corp (symbol: MCD) | 2.12% | 7.93% | 10.05% |
Another consideration with dividend growth stocks is how much the dividend increases. We researched the last twelve months of dividends that shareholders of each of the above five companies received, then we also researched the same number for the prior dragging twelve months. This gives us a rough yardstick to see how much the dividend has increased, from one twelve month period to the next.
| Store | Previous TTM dividend | TTM dividend | % Growth |
|---|---|---|---|
| Exxon Mobil Corp (Symbol: XOM) | $3.48 | $3.51 | 0.86% |
| International Business Machines Corp (Symbol: IBM) | $6.24282982791587 | $6.4978776290631 | 4.09% |
| Sonoco Products Co. (Symbol: SON) | $1.76 | $1.84 | 4.55% |
| Cullen/Frost Bankers, Inc. (Symbol: CFR) | $2.87 | $3 | 4.53% |
| McDonald’s Corp (symbol: MCD) | $5.12 | $5.43 | 6.05% |
These five stocks are part of our full range List of Dividend Aristocrats. The analyst average target price data on 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.
