With 2018 wrapping up in a rather ominous manner, I thought it would be an interesting experiment to use only Intrinio data to try and decipher which dividend growth stocks might perform the best in 2019.
For this exercise, I will ONLY look at Intrinio data and their built-in financial ratios and formulas to evaluate a rather large list of stocks (roughly 115 individual companies) I currently hold in my dividend portfolio.
Below are the top 7 companies that rate well. As I have no certainty if this is the start of a bear market (with some sectors & companies down 20%) or just a steep correction, I have attempted to assemble a list of high-quality, dividend growth stocks with stable earnings, increasing dividends, manageable debt, and plenty of cash flow to cover those (hopefully) rising dividends - even during difficult times.
But first, a necessary disclosure. I am not a financial advisor and my favorite stocks for 2019 should not be interpreted as financial advice. Please do your own research before making any investment decisions for your own portfolio.
I have shared a static version of this Google spreadsheet here, as I’m not able to share a spreadsheet that includes Intrinio calls with my personal credentials. However, all data is pulled from Intrinio and one can easily assemble this spreadsheet after creating their free account.
So, let's get straight to it. Here are the 7 stocks that I believe will fare well in 2019, and I’ll talk about the ratios and formulas that I used to determine these names below.
While there are more financial acronyms and ratios than there are stars in the sky, here are the ones I used that lead me to believe these companies will fare well in 2019. It’s extremely difficult to be a prophet in the land of profits, so take my picks with a grain of salt. Fortunately, Intrinio provides constantly updated data that is key at any time, but especially during extreme market volatility. Use it!
ROIC (Return on Invested Capital) is a fantastic ratio that tells you how much profit a company can produce for every buck invested. Obviously, we are looking to invest in companies that can produce large amounts of cash on their invested cash.
FCFY (Free Cash Flow Yield) gives us a P/E type look at a company, but with better detail of company performance. One method, used here, to calculate FCFY is by dividing enterprise value by FCF.
Net Debt to EBITDA Ratio (Earnings Before Interest Appreciation and Amortization) tells us, roughly, how many years it would take a company to pay off its debt if debt and EBITDA remained stagnant. This is calculated by dividing net debt by EBITDA.
Dividend Payout Ratio allows us to easily decipher how much of a company's earnings are used to pay to shareholders. This is calculated by annual dividends per share divided by earnings per share.
If I were to only pick one stock that I believe is set to outperform in 2019, it would have to be $DIS. 2019, without a doubt, will be a big year for the mouse. With huge updates to the theme parks that will bring record numbers, a full line up of blockbuster movies and their streaming service, Disney+ going live, 2019 should shape up to be a magical year for Disney. Also, I realize both $MA and $V, competitors in the financial services industry, are listed. Both look great and will continue to do well, even during turbulent times.
If we do find ourselves in a bear market in 2019, all bets are off. Fundamentals are important, but not as important as market sentiment. One thing I have learned with the market over the years is many macroeconomic factors don’t matter until they do. And when they do, ripping off of the bandaid hurts… badly.
One last disclaimer. Before a MD recommends a course of action, the doctor examines the patient (eg. symptoms, weight, age). My opinions of valuations are centered around accumulating great dividend growth stocks where zero investment income is necessary. Your financial status, investment income requirements, and diversification might be very different than mine. Please seek counsel with your professional investment advisors before investing.
Happy New Year and good luck!
The Dividend Pig is a financial blogger focused on teaching others the fundamentals about dividend growth investing while showcasing his growing dividend portfolio.