7 Dividend Growth Stocks On Sale

My goal is to purchase quality companies that grow earnings and dividends at an attractive price. Most members of the dividend champions list exhibit characteristics of a quality company. After all, only a company with a strong business can afford to consistently grow earnings and dividends every single year for a quarter of a century.

To come up with the companies below, I started with a custom made list of the dividend champions I keep at Yahoo Finance. Being a dividend champion fulfills the quality criterion.

I then sorted the list by P/E ratio, and picked the companies with a P/E below 20. I have a maximum P/E requirement in order to avoid overpaying for companies. Even the best company in the world is not worth overpaying for.

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The next step in the process included evaluating trends in earnings per share and dividends per share. As I mentioned above, I want companies that can grow earnings per share (1) over time. This will drive future increases in dividends, and protect the purchasing power of my income in retirement. I do not want companies that increase dividends merely by increasing their payout ratios, or who have slowed down on dividend increases because their earnings are stagnant.

The companies include:

VF Corp (NYSE:VFC) engages in the design, production, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products in the United States and Europe. The company has managed to increase dividends for 44 years in a row. Over the past decade, VF Corp (NYSE:VFC) has managed to boost its dividend at a rate of 12.20%/year. Earnings per share rose from $1.18 to $2.85 over the past decade. The company is expected to earn $3.12/share over the next year. Currently, the stock is attractively valued at 15.90 times forward earnings and yields 3.40%. VF Corp (NYSE:VFC) has been on my watchlist for a few months.

Target Corporation (NYSE:TGT) operates as a general merchandise retailer. The company has managed to increase dividends for 49 years in a row. Over the past decade, Target Corporation (NYSE:TGT) has managed to boost its dividend at a rate of 18.10%/year. Earnings per share rose from $3.21 to $5.25 over the past decade. The company is expected to earn $5.06/share over the next year. Currently, the stock is attractively valued at 12.60 times forward earnings and yields 3.80%. Check my analysis of Target Corporation (NYSE:TGT) (2) for more information.

AFLAC Incorporated (NYSE:AFL), through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance products. It operates through two segments, Aflac Japan and Aflac U.S. The company has managed to increase dividends for 34 years in a row. Over the past decade, AFLAC Incorporated (NYSE:AFL) has managed to boost its dividend at a rate of 11.70%/year. Earnings per share rose from $2.95 to $5.85 over the past decade. AFLAC Incorporated (NYSE:AFL) is expected to earn $6.84/share over the next year. Currently, the stock is attractively valued at 10 times forward earnings and yields 2.50%. The company has been on my watchlist for a few months.

T. Rowe Price Group Inc (NASDAQ:TROW) is a publicly owned investment manager that launches and manages equity and fixed income mutual funds. The company has managed to increase dividends for 30 years in a row. Over the past decade, T. Rowe Price Group Inc (NASDAQ:TROW) has managed to boost its dividend at a rate of 14.50%/year. Earnings per share rose from $2.40 to $4.75 over the past decade. T. Rowe Price Group Inc (NASDAQ:TROW) is expected to earn $4.78/share over the next year. Currently, the stock is attractively valued at 14.20 times forward earnings and yields 3.20%. Check my analysis of T. Rowe Price for more information.

Johnson & Johnson (NYSE:JNJ), together with its subsidiaries, researches and develops, manufactures, and sells various products in the health care field worldwide. It operates through three segments: Consumer, Pharmaceutical, and Medical Devices. This dividend king has managed to increase dividends for 54 years in a row. Over the past decade, Johnson & Johnson (NYSE:JNJ) has managed to boost its dividend at a rate of 8%/year. Earnings per share rose from $3.63 to $5.93 over the past decade. Johnson & Johnson (NYSE:JNJ) is expected to earn $7.04/share over the next year. Currently, the stock is attractively valued at 16.20 times forward earnings and yields 2.80%. Check my analysis of Johnson & Johnson (3) for more information.

General Dynamics Corporation (NYSE:GD) operates as an aerospace and defense company worldwide. It operates through four business groups: Aerospace; Combat Systems; Information Systems and Technology; and Marine Systems. The company has managed to increase dividends for 25 years in a row. Over the past decade, General Dynamics has managed to boost its dividend at a rate of 12.80%/year. Earnings per share rose from $4.20 to $9.08 over the past decade. The company is expected to earn $9.78/share over the next year. Currently, the stock is attractively valued at 18.70 times forward earnings and yields 1.70%.

Chesapeake Financial Shares Inc (OTCMKTS:CPKF) operates as the bank holding company for Chesapeake Bank that provides various banking products and services for corporate and individual clients in Virginia, the United States. The company has managed to increase dividends for 25 years in a row. Over the past decade, Chesapeake Financial Shares Inc (OTCMKTS:CPKF) has managed to boost its dividend at a rate of 8.20%/year. Earnings per share rose from $0.93 to $1.71 over the past decade. Currently, the stock is attractively valued at 12.50 times earnings and yields 2.30%.

Full Disclosure: Long VFC, TGT, AFL, TROW, JNJ, GD.

Additional Links:

(1) http://www.dividendgrowthinvestor.com/2015/06/the-most-important-metric-for-dividend.html

(2) http://www.dividendgrowthinvestor.com/2016/05/target-attractively-valued-dividend.html

(3) http://www.dividendgrowthinvestor.com/2016/06/johnson-johnson-my-favorite-dividend.html