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How do you secure your retirement? Start with these 7 great dividend growth stocks for a secure retirement.
At Millionaire Mob, we focus on building increasing our income through a number of channels. One of our favorite passive income opportunities is dividend growth investing. Dividend growth investing takes little work relative to the longer-term capital appreciation opportunity. Over time, you can build a significant dividend portfolio of dividend income stocks and live comfortably SOLELY off of dividends. Here we are happy to highlight 7 great dividend growth stocks for a secure retirement. Using our criteria from our dividend discount model guide, these 7 stocks are considered undervalued dividend growth stocks.
7 Great Dividend Growth Stocks For a Secure Retirement
Dividend growth investing is a core way to achieve financial freedom. I love finding great dividend growth stocks at attractive valuations. Check out our building a dividend growth portfolio infographic if you want to learn more.
Why dividend growth investing?
Overall, we think that dividend growth investing offers a great opportunity to build wealth and income. We’ve built a fantastic guide on dividend growth investing. I like to complement great dividend growth stocks with one global dividend growth fund to ensure I’m diversified geographically.
In the U.S., several of these 7 great dividend growth stocks are included in a number of dividend growth funds. Building a dividend portfolio can have massive benefits over the long-term, which include residual income and long-term capital appreciation.
In later pieces, we will suggest the top dividend growth funds to target for investment.
Here are our 7 Great Dividend Growth Stocks For a Secure Retirement
I’d rather have great, stable dividend growth stocks rather than a growth stock with wild volatility and an unpredictable future. Our 7 great dividend growth stocks listed below are not for retirement, but rather are selected to help secure retirement in the future.
These dividend growth stocks will help provide value, growth and residual income along the way. Remember, compound interest is your friend. It pays (literally) to build a portfolio of dividend growth stocks. Based on our analysis all of the below companies are undervalued dividend growth stocks.
I try to use a similar approach to finding new dividend growth stocks as Eric Ervin’s Reality Shares does, which is finding value in dividend growth companies by assessing their dividend health.
Their DIVCON system is a dividend health rating system that assesses the likelihood that companies will grow or cut their dividends. It is a fascinating concept that can be a great way for idea generation before making an investment decision.
We used our methods to find undervalued dividend growth stocks. Here are some of our favorite 7 great dividend growth stocks for a secure retirement, including their annual dividend yield:
- Delta Airlines (DAL): Delta Airlines presents a great opportunity to own a stock that is not understood by investors. There are a number of people that are concerned that the airlines are skeptical of cyclicality. We are not as concerned. I believe the Delta Airlines has advanced their technology to figure out how to make money efficiently and effectively. I expected dividends to increase for a number of years. The stock is attractively valued at current prices.
- Annual Dividend Yield: 2.27%
- Price / Earnings Ratio: 10.90x
- Comcast Corporation (CMCSA): Comcast is an interesting dividend growth stock. The public believes that people are cutting the cord and moving to internet based entertainment. This could be true. However, Comcast could be a very nice contrarian play as they have made recent acquisition in other media channels.
- Annual Dividend Yield: 1.89%
- Price / Earnings Ratio: 8.40x
- Aflac Incorporated (AFL): Aflac is the perennial underdog. The stock should benefit from rising interest rates as insurance companies are able to reinvest their balance sheet investments at higher rates of return. Aflac is very attractively valued at current prices at 7.78x
- Annual Dividend Yield: 2.43%
- Price / Earnings Ratio: 7.78x
- Union Pacific Corporation (UNP): Union Pacific Corporation has been as steady as she goes (minus the pullback in the railroads a year back). However, I believe railroads will continue their steady growth and return capital to shareholders with their strong return on equity.
- Annual Dividend Yield: 2.06%
- Price Earnings Ratio: 9.55x
- Prudential Financial Inc. (PRU): Prudential (like Aflac) should benefit from rising interest rates as insurance companies are able to reinvest their balance sheet investments at higher rates of return. Prudential is attractively valued at current prices and sports a solid annual dividend yield. Analysts anticipate Prudential to increase their EPS in the coming year and I believe that will trickle down to shareholders as well in the form of dividends.
- Annual Dividend Yield: 2.70%
- Price / Earnings Ratio: 11.21
- CME Group Inc. (CME): CME Group operates as a financial markets company offering options and futures exchanges. CME was the first exchange to start offering bitcoin futures. CME is almost like technology company. The exchanges are all electronic. CME is a growth stock and a dividend growth stock. The stock continues to run up and has provided investors with stable capital appreciation. This is a great opportunity to have growth exposure and dividend growth for the future. For the recent growth and anticipated future growth, the stock is still priced below the average of the S&P 500.
- Annual Dividend Yield: 1.65%
- Price / Earnings Ratio: 13.40x
- Citizens Financial Group, Inc. (CFG): Citizens Financial Group operates as an American regional bank with operations in Connecticut, Delaware, Massachusetts and more. They primarily have exposure to the Northeastern states of United States. Like insurance stocks, regional banks should earn a better net interest margin with rising interest rates. Banks will now be able to lend at higher rates. They will indeed have to pay consumers more on their savings accounts, but the gross dollars increase with limited increases in overhead. Citizens should pay handsome dividend increases over the next few years.
- Annual Dividend Yield: 1.96%
- Price / Earnings Ratio: 13.73x
All of the above dividend growth stocks sport dividend payout ratios of less than 50%. We believe this is a great safety net in case the company hits headwinds on earnings growth. The annual dividend yields for the above companies are not high. However, these are high-quality companies with established brand names and attractive valuations. Build your dividend portfolio with companies that have those qualities. From there, you can fill in higher yielding REITs or MLPs for high dividend yield. This would lead to a great dividend yield portfolio. We love investing in undervalued dividend growth stocks.
Have you tried our short-form dividend discount model? Try running these companies through the model to test the results. This should help you make a decision on whether or not to explore the potential of including these dividend growth stocks in your portfolio.
Or do you need to learn how to use the dividend discount model? We have a guide to help you use the dividend discount model.
Did you know that there are brokerages that will simply give you free stock just for signing up? That’s a great no-risk way to start investing.
What are your 7 Great Dividend Growth Stocks For a Secure Retirement? Retiring on dividend stocks is a possibility if you stay disciplined. Escalate your life. Please let us know in the comments below.
Disclosure: Millionaire Mob owns Delta Airlines (DAL) and Aflac (AFL) in their dividend growth stock portfolio with Robinhood.
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