TOP 10 DIVIDEND GROWTH STOCKS REPORT - The Dividend …

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TOP 10 DIVIDEND GROWTH

STOCKS REPORT

A list of 10 companies every dividend growth investor should consider

TOP 10 DIVIDEND GROWTH STOCKS

Table of Contents

Legal Term of Use .................................................................................................. 4 Introduction........................................................................................................... 5 3M Co (MMM) ....................................................................................................... 6

What Makes MMM a Good Business ................................................................. 6 Dividend Growth Perspective............................................................................. 7 Stock Valuation .................................................................................................. 8 BlackRock (BLK).................................................................................................... 10 What Makes BLK a Good Business ................................................................... 10 Dividend Growth Perspective........................................................................... 11 Stock Valuation ................................................................................................ 12 Walt Disney (DIS) ................................................................................................. 13 What Makes DIS a Good Business .................................................................... 13 Dividend Growth Perspective........................................................................... 15 Stock Valuation ................................................................................................ 15 Johnson & Johnson (JNJ) ...................................................................................... 17 What Makes JNJ a Good Business .................................................................... 17 Dividend Growth Perspective........................................................................... 18 Stock Valuation ................................................................................................ 19 Lockheed Martin(LMT)......................................................................................... 20 What Makes LMT a Good Business .................................................................. 20 Dividend Growth Perspective........................................................................... 21 Stock Valuation ................................................................................................ 21 Canadian National Railway (CNR.TO) ................................................................... 23

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TOP 10 DIVIDEND GROWTH STOCKS

What Makes CNR.TO a Good Business ............................................................. 23 Dividend Growth Perspective........................................................................... 24 Stock Valuation ................................................................................................ 24 Canadian Tires (CTC.A.TO) ................................................................................... 26 What Makes CTC.A.TO a Good Business .......................................................... 26 Dividend Growth Perspective........................................................................... 27 Stock Valuation ................................................................................................ 27 Emera (EMA.TO) .................................................................................................. 29 What Makes EMA.TO a Good Business ............................................................ 29 Dividend Growth Perspective........................................................................... 30 Stock Valuation ................................................................................................ 30 Royal Bank (RY.TO) .............................................................................................. 32 What Makes RY.TO a Good Business................................................................ 32 Dividend Growth Perspective........................................................................... 33 Stock Valuation ................................................................................................ 33 Telus (T.TO).......................................................................................................... 35 What Makes T.TO a Good Business.................................................................. 35 Dividend Growth Perspective........................................................................... 36 Stock Valuation ................................................................................................ 36 What's Your Next Step......................................................................................... 38

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TOP 10 DIVIDEND GROWTH STOCKS

Legal Term of Use

THE CONTENTS OF THIS MANUAL REFLECT THE AUTHOR'S VIEWS ACQUIRED THROUGH HIS EXPERIENCE ON THE TOPIC UNDER DISCUSSION. THE AUTHOR AND/OR PUBLISHER DISCLAIM ANY PERSONAL LOSS OR LIABILITY CAUSED BY THE UTILIZATION OF ANY INFORMATION PRESENTED HEREIN. THE AUTHOR IS NOT ENGAGED IN RENDERING ANY LEGAL OR PROFESSIONAL ADVICE. THE SERVICES OF A PROFESSIONAL ARE RECOMMENDED IF LEGAL ADVICE OR ASSISTANCE IS NEEDED.

WHILE THE SOURCES MENTIONED HEREIN ARE ASSUMED TO BE RELIABLE AT THE TIME OF WRITING, THE AUTHOR, PUBLISHER AND THEIR AFFILIATES ARE NOT RESPONSIBLE FOR THEIR ACTIVITIES. FROM TIME TO TIME, SOURCES MAY TERMINATE OR MOVE AND PRICES MAY CHANGE WITHOUT NOTICE. SOURCES CAN ONLY BE CONFIRMED RELIABLE AT THE TIME OF ORIGINAL PUBLICATION OF THIS MANUAL.

THIS MANUAL IS A GUIDE ONLY AND, AS SUCH, SHOULD BE CONSIDERED SOLELY FOR BASIC INFORMATION. EARNINGS OR PROFITS DERIVED FROM PARTICIPATING IN THE FOLLOWING PROGRAM ARE ENTIRELY GENERATED BY THE AMBITION, MOTIVATION, DESIRE AND ABILITIES OF THE INDIVIDUAL READER.

NO PART OF THIS MANUAL MAY BE ALTERED, COPIED, OR DISTRIBUTED WITHOUT PRIOR WRITTEN PERMISSION OF THE AUTHOR OR PUBLISHER. ALL PRODUCT NAMES, LOGOS, AND TRADEMARKS ARE PROPERTY OF THEIR RESPECTIVE OWNERS WHO HAVE NOT NECESSARILY ENDORSED, SPONSORED, OR APPROVED THIS PUBLICATION. TEXT AND IMAGES AVAILABLE OVER THE INTERNET AND USED IN THIS MANUAL MAY BE SUBJECT TO INTELLECTUAL RIGHTS AND MAY NOT BE COPIED FROM THIS MANUAL.

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TOP 10 DIVIDEND GROWTH STOCKS

Introduction

Hello!

My name is Mike McNeil and I'm the author of The Dividend Guy Blog along with the owner and portfolio manager over at Dividend Stocks Rock. I earned my bachelor degree in financemarketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I'm also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family.

I used to struggle with the same issues millions of small investors deal with on a daily basis. Which stocks to buy? When to sell them? How to find the time to manage my portfolio? How to diversify? I wasn't into dividend investing until I looked in depth at my portfolio returns and realized I was having difficulty keeping up with the market.

The root of the problem was a very poorly built portfolio that lacked structure and the components required to build a sturdy base. I made good money from the stock market but I was taking unnecessary risk to achieve my investing goals.

From that point on, I was determined to create a portfolio strategy that would allow me to benefit from dividend growth stocks as a solid foundation. Since then, I manage my portfolio with a stress free method that enables me to cash out dividend payments even when the market goes sour.

The purpose of this guide is to create a list of 10 very strong dividend growth stocks that I can buy and sleep on. I didn't want to make an exhaustive list as there are several great companies to buy. I didn't want to make a classic list either, this is why I tried to avoid classics such as Coca-Cola (KO) in this list... but I couldn't help including Johnson & Johnson (JNJ) hahaha!

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TOP 10 DIVIDEND GROWTH STOCKS 3M Co (MMM)

What Makes MMM a Good Business The strongest reason why you should add MMM to your portfolio is related to its incredible ability to generate cash flow on a constant basis. Most 3M products are consumable and generate repeat purchases. MMM makes sure to keep its competitors behind it by spending over 2 billion in R&D annually while using another 2 billion for acquisitions each year. However, 3M Co doesn't forget about its shareholders either. MMM has a strong history of dividend growth and stock repurchases. The business evolves in 5 different segments:

Industrial Business (34%): This is the largest segment in terms of sales. The division provides adhesives, abrasives, filtration systems, fasteners and specialty materials to a variety of industries.

Safety and Graphics (18%): This business offers films, reflective materials, projection systems, and the like. I bet you didn't know much about this part of 3M Co, right?

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TOP 10 DIVIDEND GROWTH STOCKS

Electronics and Energy (17%): This is 3M's biggest business operation in Asia with two-thirds of its revenue coming from this region. Electronics and Energy provides products for businesses including films for LCD screens and splicing products for signal cables.

Healthcare (17%): The Healthcare business focuses on products offered to more developed countries such as the US and Europe. It makes products in the areas of wound care, oral care, drug delivery systems, etc.

Consumer and Office (14%): This is probably the division we know best as consumers; 3M offers a variety of home office products in developed countries. Over half of these segment revenues come from the US.

Dividend Growth Perspective The company has posted a double digit annual dividend growth rate over the past 5 years (11.48%). Since earnings continue to increase even considering currency headwinds, dividend investors should expect more dividend increases in the upcoming years.

MMM was able to keep a payout ratio around 50% during the past 5 years leading us to think that future dividend increase is sustainable even if the company faces a global economic slowdown in the next couple of years.

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TOP 10 DIVIDEND GROWTH STOCKS

Stock Valuation In my opinion, MMM should be part of most conservative (or core) dividend portfolios. While you shouldn't expect incredible growth from this company, dividend payment increases will always be there each year. In order to verify if it's the right time to buy MMM, we will look at the company's 10 year PE history along with a Dividend Discount Model calculation.

As you can see, the strong dividend increase in the past 5 years hasn't been ignored by the market. The P/E ratio has continuously increased over the past 3 years. It seems the company hasn't been highly valued as right now. Let's use the dividend discount model to see how much the company is worth according to its dividend payment ability.

Margin of Safety 20% Premium 10% Premium Intrinsic Value 10% Discount 20% Discount

Calculated Intrinsic Value OUTPUT 15-Cell Matrix

Discount Rate (Horizontal)

8.00%

9.00%

$335.66

$222.34

$307.69

$203.82

$279.72

$185.29

$251.75

$166.76

$223.78

$148.23

10.00% $165.75 $151.94 $138.13 $124.32 $110.50

Source: Dividend Toolkit

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