Every week I track a list of my Top-5 Undervalued High-Quality Dividend Growth Stocks. Out of a selected list of high quality stocks I pick the five stocks that meet the following criteria:
- Undervalued by at least 10% to the DGJ Fair Value
- Payout Ratio of below 60%
- Current Dividend Yield of at least 2%
Exceptions can be made and for REITs the payout is usually higher given the legal requirements.
The order of the ranking of the Top-5 Undervalued High-Quality Dividend Growth Stocks is defined by the Quality Score from highest to lowest. The quality criteria are:
- Value Line Safety Rank (1 to 5)
- Value Line Financial Strength (A++ to B)
- Morningstar Economic Moat (Wide, Narrow, None)
- S&P Credit Rating (AAA to BBB-)
- Simply Safe Dividends Score (100 – 0)
In each category the points that are given range from 5 (highest) to 1 (lowest). As such a company with the score of 5 points in each of the categories can obtain a maximum of 25 points. If there is a tie of the overall quality score the next ranking criteria is the Simply Safe Dividend (SSD) score.
In the evolution chart you can see all the tickers that have made it into the Top-5 Undervalued High-Quality Dividend Growth Stock list since the beginning of 2021. The current Top-5 are highlighted.
One of the key takeaways from this chart is that stocks that fall into an undervalued range typically can stay there for quite some time. It is not unusual that a stock’s price remains disconnected from its earning for weeks or months. For this reason, there is plenty of time to analyze a stock and determine whether it is worth an investment. No need to buy immediately without having done the corresponding due diligence. And even if it does not stay undervalued, in the long run paying a few pennies more does not make such a difference.
In the below table you can follow the historical data and evolution chart.
Disclaimer: I am not a professional investment or financial advisor. The information presented on this site represents my personal dividend growth journey and it is for informational purposes only. Opinions expressed are my own and should NOT be relied on or taken as investing advice. I have no knowledge about your personal situation and before you make any investment decision you should exercise due diligence and must do your own research. Always consider seeking advice from a professional financial and tax advisor.