Top 5 Stocks For July 2021

High-quality dividend growth stocks are like golden geese. And the growing dividends these stocks pay out are like ever-more golden eggs.

If you can build a dividend growth stock portfolio that’s large enough, you can live off of that growing dividend income only. Don’t slaughter the golden geese. Live only off of the golden eggs.

Simply put, high-quality dividend growth stocks are some of the best stocks in the whole world. That’s because it takes a world-class enterprise to be able to fund growing dividends for decades on end.

However, the market’s been on a tear. And many high-quality dividend growth stocks are very expensive and no longer look buyable.

That said, there are still some undervalued gems out there. Today, I want to give you my top five dividend growth stocks to buy for July 2021. Ready? Let’s dig in.

#1 Dividend Growth Stock for July 2021: Bristol-Myers Squibb (BMY)

Bristol-Myers Squibb is a global biopharmaceutical company.

With a market cap of $149 billion, this is a major pharma business. They’ve got one of the top drugs in the world – Revlimid. Growth has been pretty solid, too. Revenue has grown at a compound annual growth rate of 8% over the last decade, while EPS has a CAGR of almost 13% over the last 10 years.

You know what else is growing? The dividend.

Bristol-Myers Squibb has increased its dividend for 12 consecutive years, with their most recent dividend increase coming in at almost 9%. And the dividend is protected by a low payout ratio of 26.3%, based on midpoint FY 2021 non-GAAP EPS guidance. Plus, the stock yields a market-beating 2.9%.

Meanwhile, the stock’s valuation is very reasonable.

The forward P/E ratio is below 10, based on the aforementioned guidance. The P/CF ratio, at 10.9, is about half that of its five-year average of 21.1. Our recent full analysis and valuation showed the stock’s estimated intrinsic value at about $70/share. This looks like a great stock available for a great valuation.

#2 Dividend Growth Stock for July 2021: Enbridge (ENB)

Enbridge is an energy distribution and transportation company.

This is the largest energy infrastructure company in North America. A massive pipeline player with a market cap of $81 billion. Because it’s in transportation, not production, it’s largely insulated from volatile moves in energy prices. That creates a smoother upward growth trajectory. Revenue has compounded at an annual rate of 8.1% over the last decade. And DCF/share has grown at a compound annual rate of 8.3% since their acquisition of Spectra Energy closed in 2017.

This is a big, fat dividend – that’s also growing.

You usually have to pick between a high yield and a high growth rate. Enbridge is the rare business that has typically given its investors both. The stock yields a market-smashing 6.8%. Even without much growth, that yield is awesome. However, Enbridge has increased its dividend for 25 consecutive years, with a 10-year DGR of 11.3%. This is a high yield and high dividend growth. You’ll rarely find this combination of yield and growth. And the payout ratio of 68.9% indicates no trouble with the dividend.

Despite being up almost 30% this year, the stock still looks attractively valued.

We put out a full analysis and valuation video on Enbridge not too long ago, concluding that shares could be worth almost $50/each. The stock is around $40/share right now, so that’s a lot of upside. Meantime, you’re collecting that fat dividend while you wait for the upside to unfold.

#3 Dividend Growth Stock for July 2021: Huntington Bancshares (HBAN)

Huntington is a regional bank holding company.

This is a pretty small business compared to my other picks. The market cap is only $21 billion. But that just means there’s room to grow. And grown it has. They’ve compounded revenue at an annual rate of 7% over the last decade. Now, EPS has a CAGR of less than 2% over that same time frame. But that’s only because of the pandemic and the loan loss reserves nicking FY 2020’s results. Profit is springing back big time this year.

This surge in profit could lead to much higher dividends.

The regional bank has increased its dividend for 10 consecutive years, with a five-year DGR of 20.1%. That’s incredible. And I think there’s much more to come – the payout ratio is only 52.6%, giving them plenty of dividend growth firepower. Meanwhile, the stock yields 4.2%. That yield beats out almost every other regional bank stock I know of.

The stock is up 14% YTD, but the valuation remains compelling.

The P/E ratio is 12.5. That’s extremely low in this market. We put out a full analysis and valuation video on this regional bank only days ago, highlighting its appeal and low valuation. My valuation estimate came in at over $17/share. The stock is a bit over $14/share right now. That’s a very advantageous gap between price and value.

#4 Dividend Growth Stock for July 2021:Lockheed Martin  (LMT)

Lockheed Martin is the world’s largest defense contractor.

With a market cap of $106 billion, this is the 800-pound gorilla in the room. It’s the prime defense contractor. That majestic position has led to big growth. Revenue has compounded at almost 4%/year over the last decade. EPS sports a CAGR of 13.4% over the last 10 years.

The impressive bottom-line growth has fueled impressive dividend growth.

Lockheed Martin has increased its dividend for 18 consecutive years. The 10-year DGR is 14% – pretty much right in line with EPS growth. And with a payout ratio of 42%, there’s plenty more room for future dividend raises. Plus, the stock yields a market-beating 2.7%.

Surprisingly, this stock looks downright cheap.

Price is what you pay. But value’s what you get. The stock’s price of $381/share looks cheap to me when you compare that to the estimated fair value of $500/share. Our analysis and valuation video, which we put out a couple months ago, shows how we arrived at that figure. This stock could move up in a hurry.

#5 Dividend Growth Stock for July 2021: Pinnacle West (PNW)

Pinnacle West is a utility holding company.

Despite the corporate name that might imply otherwise, this is actually an electricity utility business operating in Arizona. One of their major service territories lies within the Phoenix metro area – one of the fastest-growing areas of the United States. The company sports pretty typical utility growth over the last decade – revenue has compounded at about 1% annually, and EPS at just over 5% annually. But based on recent population growth trends in Arizona, this company’s future is about as bright as the sun in Phoenix.

That should translate to more dividend increases.

Already, they’ve increased their dividend for nine consecutive years. The five-year DGR is 5.7%, which is plenty when you consider that the stock also yields 4%. And with a pretty pedestrian payout ratio of 67.5%, the dividend is easily covered.

The stock hasn’t moved up much this year, creating an even more attractive valuation relative to the market.

I thought this stock looked good at the start of 2021. But with some mild underperformance YTD, it looks even better. Almost every basic valuation metric, including the P/E ratio of 16.8, indicates undervaluation relative both to the stock itself and the market as a whole. Keep in mind, the stock’s own five-year average P/E ratio is 18.7, and this was a $100 stock before the pandemic. We’ll have a full analysis and valuation video coming out soon on Pinnacle West. Suffice it to say, this is an attractive utility business operating in an attractive area trading for an attractive valuation.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.


We’re Putting $2,000 / Month into These Stocks
The goal? To build a reliable, growing income stream by making regular investments in high-quality dividend-paying companies. Click here to access our Income Builder Portfolio and see what we’re buying this month.