Our Top 10 Dividend Growth Stocks - May 2024

Core Insights - The focus is on selecting high-growth dividend stocks that have rapidly increased their dividends in the recent past and are expected to continue growing their earnings at a fast pace [1][16] - There are two main categories of dividend stocks: High Growth Low Yield (HGLY) and Low Growth High Yield (LGHY), catering to different investor needs [2][3] - A structured portfolio approach is recommended, allowing for a maximum of 20 stocks, with periodic monitoring and adjustments based on performance [4] Stock Selection Criteria - Stocks must have a market cap greater than $10 billion, a dividend yield above 1%, and a daily average volume exceeding 100,000 [5] - Additional criteria include a history of positive dividend growth over the past five years and a preference for a minimum of five years of consistent dividend growth [5][6] - A modified Quality Score (HGQS) is calculated based on factors such as EPS growth, dividend growth history, and debt ratios to identify high-growth candidates [6][10] Portfolio Construction - The portfolio should be diversified across various sectors, with a maximum of 20 positions, and new stocks should be added based on monthly reports [4][12] - The final selection of stocks aims to represent a diverse range of sectors while maintaining a focus on high growth potential [12][17] - The methodology allows for some stocks to repeat in the selection process, indicating their sustained quality and growth potential [12] Performance Analysis - A model portfolio of selected high-growth stocks is compared against benchmarks like the Vanguard Dividend Appreciation Index Fund ETF and the S&P 500 to assess performance [13][14] - Monthly performance comparisons help in evaluating the effectiveness of the investment strategy over time [14] Concluding Remarks - The article emphasizes the importance of selecting high-growth dividend stocks, which typically have lower current yields but significant growth potential [16] - The current market conditions suggest that many selected stocks are trading near their 52-week highs, indicating a potential risk for conservative investors [16]