Top U.S. Dividend Growth Stocks for January

The U.S. stock market, using SPDR S&P 500 ETF Trust (NYSE:SPY) as a proxy, has bounced about 8% from a low in December. The ETF has some strong resistance at the US$270 range. It needs to break that range and make a new high to indicate that the correction that started in October won’t continue.

technical chart showing SPY bouncing from Dec 2018 low
Source: Stockcharts

Despite the market rebounding, there are still some good-value quality U.S. dividend growth stocks for long-term investing. Here are two out of seven top U.S. dividend ideas I wrote about here in December. They’re still great buys today.

dividend income

Wells Fargo

Wells Fargo (NYSE:WFC) is undervalued and offers a yield of about 3.6%. The analyst consensus thinks Wells Fargo will increase its earnings per share (“EPS”) by 11-12.7% per year over the next 3-5 years. In the FAST Graphs below, I use a more conservative price-to-earnings (“P/E”) multiple and growth rate of 11 and 9%, respectively. The estimated annualized returns would be about 13.3-14.5% over the 3-5 years. 

Source: FAST Graphs – More conservative 9% estimated EPS growth rate

Normally, Wells Fargo can trade at a P/E of 13, which would imply annualized returns of 16.6-20.4%!

WFC: What Analysts Think

Morningstar thinks wide-moat WFC is undervalued. It gives WFC a fair value estimate of $67 and a super undervalued price of <$46.90.

Value Line‘s Nov 9, report gave WFC a high safety rating of 2 out of 5 (1 is safest) and a company financial strength of A. At the time, WFC traded at about $52.70 and Value Line had a 3-5 year target of $70-95 on the stock for estimated annualized total returns of 10-18%.

Thomson Reuters has a 12-month mean target of $61.30 on the stock, which represents nearly 34% near-term upside potential.

Source: Reuters

WFC: Technically

Technically, WFC has some support at the US$44. Now is a good time to buy shares for long-term accounts. It has near-term upside potential to US$58, but it needs to break above the resistance at $50-55.

Last week’s candle was relatively positive compared to the market’s.

Source: Stockcharts – WFC weekly chart

Comcast

Although Comcast (NASDAQ:CMCSA) only offers a dividend yield of 2.1%, it offers faster dividend growth. The analyst consensus thinks Comcast will increase its EPS by 11.1-18.4% per year over the next 3-5 years. CMCSA’s long-term EPS growth (orange line) looks absolutely beautiful. Oh, they come with double-digit dividend growth every year since 2009! The payout ratio of about 29% of earnings is very sustainable.

Under normal market conditions, CMCSA should be able to trade at about $42 in a year for nearly 18% upside potential from about $35.60 per share.

Source: FAST Graphs 

CMCSA: What Analysts Think

Morningstar thinks wide-moat CMCSA is undervalued. It gives CMCSA a fair value estimate of $42 and a super undervalued price of <$29.40.

Value Line‘s Dec 14, report gave CMCSA a high safety rating of 2 out of 5 (1 is safest) and a company financial strength of A. At the time, CMCSA traded at about $37.70 and Value Line had a 3-5 year target of $60-80 on the stock for estimated annualized total returns of 14-22%.

Reuters has a 12-month mean target of $44.30 on the stock, which represents nearly 29% near-term upside potential.

Source: Reuters

CMCSA: Technically

Neutral candle last week. CMCSA has some support at $31-33 level.

Source: Stockcharts – CMCSA weekly chart

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Disclosure: At the time of writing, the author owns CMCSA.

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.

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2 thoughts on “Top U.S. Dividend Growth Stocks for January

  1. Reef

    Hi Ms. Ng,
    Thanks for the interesting article. As a Canadian, are you not concerned about the weak Canadian dollar relative to the USD for such purchases?
    Thanks.
    Michael.

    Reply
    1. Passive Income Earner Post author

      Hi Michael,

      It’s true that U.S. dollars are a little high against Canadian dollars right now. That’s why it’s all the more important to focus on the valuation paid for U.S. stocks for Canadians (if you’re converting from Canadian dollars to USD). If you have a long-term investment horizon, the foreign exchange will contribute less to the overall results. The important thing is to buy quality stocks, especially in sectors or industries, which aren’t available or have limited exposure on the Canadian markets.

      Cheers,
      Kay (a.k.a. PIE)

      Reply

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