In this article we take a look at a number of dividend stocks for 2018. When investing, we want to have a strong mix of exposures, but we like to see 20-30% of a portfolio in dividend growth names. Lets discuss what we have found for dividend stocks for 2018.

 

Company Name Symbol 10-yr Dividend Growth Dividend Yield Forward EPS Forward P/E Dividend Per Share Dividend Payout Ratio Price
ABM Industries Inc. (ABM) 4.14% 1.82% 1.97 19.54 $ 0.68 35% $ 38.50
Farmers & Merchants Bancorp (FMCB) 4.69% 1.97% 37.44 18.03 $ 13.30 36% $675.00
Genuine Parts Co. (GPC) 6.92% 2.94% 4.58 20.31 $ 2.68 59% $ 93.01
Johnson & Johnson (JNJ) 8.03% 2.37% 7.28 19.48 $ 3.28 45% $141.78
Lowe’s Companies (LOW) 22.92% 1.92% 4.51 19.70 $ 1.46 32% $ 88.86
Parker-Hannifin Corp. (PH) 14.45% 1.36% 9.56 20.72 $ 2.61 27% $198.07
Stepan Company (SCL) 6.91% 1.13% 4.34 18.47 $ 0.82 19% $ 80.18
Target Corp. (TGT) 18.09% 3.96% 4.54 14.11 $ 2.42 53% $ 64.06

This group of companies is not an automatic buy. Rather, this is a list of companies for further research. Every reader has to decide for themselves whether these companies make sense to them before committing any of their hard-earned money (or not).

The next step in the process involves going through each company individually, and determining whether we like the trends in fundamentals such as earnings or revenues over a period of time (for example, the past decade). We have found that focusing on the numbers has definitely given me an edge over the past decade

This step also involves performing a qualitative analysis, in order to understand the business, and try to determine for ourselves if the good times will continue. This is a subjective evaluation, because we have found that “quality” lies in the eyes of the beholder. Two different investors will reach starkly different conclusions about the same investment, even if they have access to the same information.

Johnson & Johnson (JNJ) is a top on the list for dividend stocks for 2018 . Investors looking for a safe and dependable earnings can look no further than Johnson & Johnson, which has rewarded them with a raise for 55 years in a row. The company is still growing despite its massive size and long history. The company has managed to grow its earnings per share from $3.63 in 2007 to $5.93 in 2016. The company is expected to earn $7.28/share in 2017. It managed to accomplish this by growing revenues from $61.10 billion in 2007 to 71.90 billion by 2016. Johnson & Johnson also has a diversified product line across medical devices, consumer products and drugs, which should serve it well in the future. This makes the company somewhat immune from economic cycles. The fact that the company has exposure to other healthcare segments besides pharmaceuticals makes it a much safer play on the healthcare sector than pure pharma companies. We like the fact that there is diversity in the revenue generating behind each of the large segments. The three segments include Pharmaceutical with 45% of sales, Medical Devices & diagnostics with 35% of sales and the Consumer segment with approximately 20% of sales.

In addition, the company has strong competitive advantages due to its scale, leadership role in various diverse healthcare segments, breadth of product offerings in its global distributions channels, continued investment in R&D, high switching costs to users of its medical devices, as well as its stable financial position. Future profit growth could come from new product offerings, which are the result of continued investment in research and development, and through strategic acquisitions. We subscribe to the theory that a body in motion continues in motion until something changes. We believe that Johnson & Johnson can reasonably be expected to grow earnings per share by 5%-6%/year, which could also result in annual dividend growth roughly equaling those same percentages.

Using this framework, you can identify other dividend names that we have pegged as top dividend stocks for 2018.

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