Undervalued Dividend Growth Stocks December 2019

Stock Analysis

Written by Robert Hodges

Published on December 06, 2019

Over the past seven years, I have developed my K.I.S.S. system for investing in dividend growth stocks. The K.I.S.S. system is a screen that I use each month to identify undervalued dividend growth stocks that I might consider adding to my portfolio. I post my portfolio update each quarter to show all the transactions I make and how the portfolio is doing. My next update will be out in January, but the one from the third quarter of 2019 can be found here: 3nd quarter 2019 update.

Up until last year, I had only shown the stocks I decided to purchase. But more recently, I have decided that I’m going to send out the list of all the stocks that passed my KISS screen, so that people can see how the screen works, all the stocks that passed the screen, and have a good list of some potentially undervalued stocks for them to research.

Having said that, let me stress that nothing I present here is, or should be considered to be, a recommendation to buy any of these stocks. Every investor should do their own research before buying any stock, including the ones presented here.

Before I present the list of passing stocks, let me present the actual screening system I use.

The K.I.S.S. System

For the Purchase of Regular Stocks

  • The stock must be on the Dividend Champions, Contenders and Challengers (“CCC”) list (as previously compiled by David Fish, but now compiled by Justin Law); (Thank you, David. You will be missed. I couldn’t have done any of this without you.)
  • the payout ratio is < 60%;
  • the Dividend Yield is greater than 2.0%.
  • the Chowder Number (Dividend yield + 5-yr. dividend growth rate) >16;
  • A dividend safety rating (DSR) of 60 or more from SimplySafeDividends.com.
  • a credit rating of BBB- or better from S&P (found on F.A.S.T. Graphs); and
  • F.A.S.T. Graphs shows a 10-year uptrend in earnings and shows that the stock is not overvalued.
    I previously allowed higher-yielding stocks to have a lower chowder number, but I have decided to streamline the process and simply go with a yield greater than 2.0 and Chowder number greater than 16.

The first 3 criteria are all found on the CCC list. The DSR is found at Simply Safe Dividends and the last two criteria are found on Fast Graphs.

For Purchase of REITs, Utilities and Energy Stocks (High Yielders)

  • The stock is on CCC list;
  • yield > 4%;
  • Chowder Number > 8%;
  • DGR for all time periods (1-yr., 3-yr., 5-yr. and 10-yr.) at least 4.0%;
  • Dividend Safety Score of 60 or more from SimplySafeDividends.com.
    F.A.S.T. Graph shows a 10-year uptrend (or for the life of the company, if less than 10 years) in funds from operations (“FFO”); and
  • F.A.S.T. Graph shows that the stock is not overvalued based on its FFO.
    The safety rating of 60 or above is a new criterion I added a few months ago. To make the cut, all the stocks must have a score of 60 or above from “Simply Safe Dividends.”

The time it takes to run this screen is only about 2 hours a month, since most of the work has already been done for me by way of the CCC list, F.A.S.T. Graphs, Simply Safe Dividends and S&P.

The evaluation of the F.A.S.T. Graphs part of the screen is a very subjective component of the system. One person could look at the F.A.S.T. Graph of a stock and say it passed, while someone else could look at it and say it failed. I need to see a steady increase in the earnings over the past 10 years (or more), while seeing that the stock price is below or close to the fair valuation for that stock. Here is an example of the F.A.S.T. Graph for one of the passing stocks to show what I consider to be a passing stock.

PNC Financial Services (PNC)

The FAST Graph for PNC above shows a steady uptrend in earnings (the blue and orange lines), from 2010-present, and the price (the black line) is trading below the fair value orange line, and is very close to the normalized PE ratio line (the blue line), indicating that the stock is at worst fairly valued.

After running the above screens, here are the stocks that passed this month:

December Passing Stocks

High Yielding Stocks


For those interested in dividend growth investing, I believe the key to being successful is addressing the following criteria:

  • The dividend history
  • The dividend growth rate
  • The dividend yield
  • The dividend safety
  • The payout ratio
  • The earnings history
  • Valuation
    I believe my KISS screen successfully incorporates all of these. Every month, I will post the stocks which pass my screen, so that readers can evaluate it and perhaps get some benefit from it.

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