I’m probably the most loyal dividend growth investor you’d ever meet. But I’m only so loyal to dividend growth investing because it’s been so loyal to me. I started buying high-quality dividend growth stocks more than a decade ago.

These stocks represent equity in world-class businesses paying reliable, rising dividends to shareholders. By buying these stocks, I was able to achieve financial freedom in only six years, at the age of 33.

These stocks loyally reward me with enough totally passive dividend income to live off of. And that’s because these businesses loyally perform at a high level. After all, they’re selling the products and/or services the world demands.

All that said, not every single stock is a good buy every single day. Which is what brings me to our topic. Today, I want to tell you my top five dividend growth stocks for December 2021. Ready? Let’s dig in.

My first dividend growth stock pick for December 2021 is Enbridge (ENB).

Enbridge is an energy distribution and transportation company.

With a market cap of $79 billion, this is the  largest energy infrastructure company in North America. Look, I don’t have my head in the sand. I know that renewables are the future of energy. But that future isn’t here and now. And in the here and now, Enbridge is providing the energy products and services we need. Their 10-year top-line CAGR is 8.1%, while the bottom line has compounded at an annual rate of 8.3% over that period.

With impressive business growth, it shouldn’t be surprising to see impressive dividend growth.

Yep. Enbridge has increased its dividend for 25 consecutive years. But it gets even better. A lot better. The stock yields a monstrous 6.8%. But wait. There’s more. The 10-year DGR is 11.3%. Where else will you find a double-digit dividend growth rate paired with a yield near 7%? And with a payout ratio of 68.9%, the dividend is almost certainly headed even higher.

This stock is up 22% this year, but that was off of a very low level.

I think this stock is rather attractive here. It’s got something for everyone. You want growth? Check. You want a market-smashing yield? Check. What about upside? Check. I recently analyzed and valued the stock, showing how shares could be worth nearly $48/each. Shares are currently trading hands for less than $39/each. So there could be a big move up here. Meanwhile, you’re getting a near-7% yield. Tough to go wrong with this one.

My second dividend growth stock pick for December 2021 is Lockheed Martin (LMT).

Lockheed Martin is the world’s largest defense contractor.

This $95 billion (by market cap) defense juggernaut confounds me. The stock has not caught any traction at all. Yet the company keeps bagging multibillion-dollar contracts left and right. This company is not short on growth. They’ve increased revenue at a CAGR of 3.9% and EPS at a CAGR of 13.4% over the last 10 years.

Big bottom-line growth tends to lead to… you guessed it – big dividend growth.

Yep. Lockheed Martin has increased its dividend for 19 consecutive years. The 10-year DGR is 9.8%. Nearly double-digit growth here. And the stock offers an appealing yield of 3.3%. These are great dividend metrics. Not the eye-popping numbers of Enbridge, sure, but this is a blue-chip company with a very, very long runway. Can you imagine any future in which sovereign defense is less important? I can’t. With a moderate payout ratio of 51.6%, I also can’t imagine any future in which Lockheed Martin isn’t paying and increasing their dividend.

This stock is flat on the year, and I think it’s ripe for accumulation.

Like I said earlier, this one confounds me. I really don’t get why the market has just totally thrown the stock away. But that’s the opportunity for long-term investors who are looking to accumulate. If you’re accumulating shares for the long term, you’d definitely rather pay a lower price than a higher one. Well, I analyzed and valued this name not long ago, showing why it could be worth almost $450/share. Shares are currently less than $350/each. That’s potential upside of more than $100/share! This is one of my best long-term ideas right now.

My third dividend growth stock pick for December 2021 is Medtronic (MDT).

Medtronic is a global developer and manufacturer of medical devices.

With its market cap of $149 billion, this is one of the biggest- and best – medical device companies in the world. Medtronic benefits both from general secular growth in healthcare as well as the non-discretionary nature of their specific area within healthcare. They’ve grown revenue at a CAGR of 7.1% over the last decade, while compounding EPS at an annual rate of 3.0% over that period. However, because the healthcare system was focused on the pandemic throughout 2020, elective surgeries could make a big comeback as we move forward. Indeed, CFRA is forecasting 10% compound annual growth for Medtronic’s EPS over the next three years.

That’s dividend music to my ears.

Yep. Double-digit bottom-line growth should translate to similar dividend growth. Already, Medtronic has increased its dividend for 44 consecutive years, easily qualifying them as a Dividend Aristocrat. It yields a market-beating 2.3% right now. And the 10-year DGR is 10.0%. If EPS of 10% is anticipated, it’s not rocket science to figure out where the dividend is going. With a payout ratio of only 44.2%, it’s even easier to figure out that the dividend is highly likely to continue growing at a high rate for years to come.

This blue-chip Dividend Aristocrat is actually down this year, and that’s why it’s now a top pick.

I haven’t covered Medtronic very often in the past. That’s mostly because I thought the valuation wasn’t super appealing. But this stock is now down nearly 20% from its early September peak, and that has put it on my radar. I just highlighted this name as an undervalued high-quality dividend growth stock. After a full analysis and valuation, I estimated intrinsic value at nearly $124/share. It’s currently at about $111/share, so I see a decent amount of upside on a Dividend Aristocrat. In this market, that’s compelling.

My fourth dividend growth stock pick for December 2021 is Omnicom Group (OMC).

Omnicom is an advertising, marketing, and corporate communications company.

This $14 billion (by market cap) company continues to perform well at the business level, despite the stock not following suit. And that disconnect between the business and the stock is why I’m highlighting it. Speaking of the business, revenue over the last decade is flat, while EPS has a CAGR of 3.1% over that period. While that only looks so-so, that’s only because of the anomalous FY 2020. Looking forward, CFRA is expecting Omnicom to compound its EPS at an annual rate of 11% over the next three years.

That kind of profit growth should allow Omnicom to continue loyally rewarding shareholders with growing dividends.

The company has already increased its dividend for 11 consecutive years. Notably, they didn’t cut the dividend during 2020, unlike a lot of other companies. The 10-year DGR of 13.2% is paired with a market-smashing yield of 4.1%. And the dividend is protected by a payout ratio of 45.0%. This dividend’s path of least resistance is one where it heads higher.

This stock has recently corrected, and it looks attractively valued to me.

This name was hovering around $77/share back in mid-October. After a solid Q3 report that saw them miss revenue expectations by a rounding error but blow away bottom-line expectations, shares corrected and are now below $68/each. That looks like a mistake by the market. I analyzed and valued Omnicom back in late August, estimating fair value at a bit over $85/share. We could be looking at more than 25% upside here.

My fifth dividend growth stock pick for December 2021 is Philip Morris (PM).

Philip Morris International is the world’s largest publicly traded tobacco company.

Their market cap of $138 billion makes them a very large company. But if the valuation weren’t so low, it’d be much bigger. The market has not shown this stock a lot of love, largely because the company has not shown a lot of growth. A secular decline in smoking hasn’t helped revenue, which is actually down over the last decade. But thanks partially to share buybacks, EPS has grown at a CAGR of 0.7% over that time frame. However, it’s the future here that’s particularly exciting, thanks mostly to their revolutionary heat-not-burn IQOS product. CFRA is forecasting an 8% CAGR for the company’s EPS over the next three years, so they could be on the cusp of a growth acceleration across the business.

And that business growth acceleration should translate to the dividend.

Philip Morris International has been increasing its dividend for as long as it’s been an independent company – that’s 14 consecutive years now. The five-year DGR of 3.2% isn’t going to drop your jaw. But the juicy yield of 5.6% might. This dividend is protected by a payout ratio of 82.9%. High, but not out of line for a tobacco company. And if the growth acceleration plays out, that gives them even more cushion here.

The stock is up 9% this year, which is decent for a high-yield name. But I think there could be a lot more to come.

I fully analyzed and valued the stock only weeks ago, concluding that shares could be worth $107/each. This name is currently under $89/share. We’re talking 20% potential upside, while you collect a market-smashing 5.6% yield. I think you could do much, much worse than that. Take a look at this stock, if you haven’t already.

— 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.

Source: DividendsAndIncome.com