The First Cut: Attractively Priced Dividend Growth

    The First Cut: Attractively Priced Dividend Growth Splash image

    When markets become uncertain, investors rediscover the desirability of stable dividend-paying stocks trading at good values. This interest has been further fueled by the favorable tax treatment of qualified dividend income (15% maximum rate*), as well as the general aging of baby boomers focusing more on steady dividend income rather than capital gains.

    This issue’s First Cut focuses on mid- to large-cap dividend-paying companies with current dividend yields (dividend divided by price) above their seven-year average, which highlights companies that may be undervalued compared to their normal yield. To help make sure dividends are secure, only companies with payout ratios (dividend divided by earnings) below 50% and long-term debt-to-equity ratios below 50% made the First Cut. Only the top 30 stocks with the highest historical dividend growth rates made the First Cut.

    Our First Cut listing also includes: the market capitalization of each stock to indicate the size of the firm; the consensus I/B/E/S earnings per share (EPS) growth rate estimate over the next three to five years to gauge the market’s growth expectations for these stocks; and the 52-week price change to highlight recent stock market performance.