2 High Growth Dividend Stocks for your Long-Term Portfolio

One year ago, it would have been difficult to find stocks at a value. After the market decline, there are more investment opportunities. Specifically, there are two high growth dividend stocks I want to bring to your attention: ITC Holdings Corp. (NYSE:ITC) and Amgen, Inc. (NASDAQ:AMGN). Both have increased dividends for at least 5 years in a row.

A High Growth Utility

In its first decade of operations, ITC Holdings has successfully acquired, integrated and improved the reliability of the transmission businesses.

Transmission investment needs are projected to require $120-160B of investment per decade through to 2030, and ITC Holdings is filling a part of that need. It is focused on improving reliability, reducing cost of power, and meeting new system needs.

ITC Holdings’ 5-year plan until 2018 forecasts operating earnings per share to grow at a compound annual growth rate (CAGR) of 11-13%, cash from operations to grow at a CAGR of roughly 10%, and dividends to grow at a CAGR of 10-15%. In August, the utility raised its quarterly dividend by 15.4%. That marks its 11th year of dividend increases. In the previous two years, it increased dividends by 12-15%, marking itself as a high growth dividend stock.

With a price of around $32.50 per share, ITC Holdings is trading at a price-to-earnings ratio (P/E) of 16, and yields 2.3%. It normally traded at a P/E of 21, so it wouldn’t be farfetched for it to trade at a P/E of 18, implying it should trade around $37.50. So, for a quality utility with a S&P credit rating of A- that’s discounted by 13%, ITC Holdings is priced at a value today.

A High Growth Biotechnology Business

All right. Add biotechnology to any name and you’d expect it to be high growth. But Amgen, Inc.’s brand brings with it some history of trustworthiness for consumers and shareholders.

Amgen, Inc. focuses on human therapeutics. It has a presence in more than 75 countries and has treated people in the fight against cancer, kidney disease, bone disease, rheumatoid arthritis, and other serious illnesses.

Its medicines tend to address diseases for which there’s a limited number of effective treatment options, or provide a viable option to what is otherwise available. Amgen is also involved with research and manufacturing operations.

Amgen has increased dividends for 5 years in a row. From starting a dividend in 2011, it has increased by a CAGR of close to 30%.Although I expect double-digit growth from Amgen going forward, I don’t expect its dividend to maintain at that high rate because at the same time it hiked its dividend, its payout ratio also expanded. It started off with a payout ratio of 7%, while now it’s much higher at 37%.

Under $144 per share, Amgen yields 2.2% and is priced around a P/E of 15. This is paying a fair value for a great business. In my books, that’s buying quality at a value.

These 2 dividend ideas were first generated from this Seeking Alpha article: Are These 5 Popular Dividend Stocks Truly Cheap?

Are you buying any high growth dividend stocks today?

If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.

Disclosure: At the time of writing, I am long AMGN and ITC.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

Get Exclusive Articles from me on Seeking Alpha

  • Access my portfolio of high-quality U.S. and Canadian dividend stocks.
  • Real-time updates of when I buy or sell from this portfolio.
  • Get best ideas of the top 3 dividend stocks from my watchlist. Updated each month.
Learn More