Top 40 Dividend Growth Stocks for 2013

My friend, Dave Van Knapp of, publishes an annual overview of the dividend-paying stock scene for $40. This year’s edition, the sixth, just came out and Dave was kind enough to send me a copy of Top 40 Dividend Growth Stocks for 2013.

Here’s the table of contents:

Top 40 Dividend Growth Stocks For 2013 TOC

In the introduction, Dave writes, “The principal goal of dividend growth investing is simple: To build a reliable, steady stream of rising income.” There are three phases in his process, each explained in a separate chapter:

Phase one is to identify the best dividend growth companies. By Dave’s way of thinking, they:

  • Are financially solid
  • Have great business models with sustainable competitive advantages
  • Offer a good initial yield at time of purchase
  • Consistently raise their dividends
  • Are relatively low in risk by dividend and stock price

On the last point, he clarifies that stock market risk can never be fully eliminated. Within the risk of the market, however, we want relatively stable companies, not firecrackers.

Phase two is valuation of companies so that you can purchase them at favorable prices. “You literally shop for stocks that are on sale,” he writes.

Phase three is portfolio management. It includes everything not covered in the first two phases: How to make timely decisions to buy, sell, hold, or replace stocks; maximize dividend streams; exercise sound risk management; manage dividend cuts; and avoid outright loss of capital wherever possible.

Dave has a good track record at winnowing out the best dividend-growers. His 2009 Top 40 stocks delivered an average dividend increase exceeding 5 pct, 2010’s selections averaged 10 pct increases, 2011’s averaged 6.3 pct, and last year’s averaged 11 pct. Plus, 39 of the 2012 gang of 40 raised its dividend last year.

He’s optimistic for this year: “I expect 2013 will be a similar year for dividends as 2012, meaning that they will continue to go up in something of a ‘normal’ fashion.” He cites the ongoing recovery from the Great Recession of 2008-2009, the attendant improvement in balance sheets providing an ability to pay dividends, a benign tax backdrop, and the aging of investors increasing demand for yield and thus pressuring companies to pay dividends.

After a terrific primer on the benefits of dividend income and buying companies that produce it, Dave outlines the characteristics of the best dividend stocks and then introduces the 2013 Top 40 with “sufficient variety” to “create a well-rounded portfolio” as shown in the following breakdown by sector, with the numbers at the front of each row taken from the Global Industry Classification Standard (GICS):

Top 40 Dividend Growth Stocks for 2013 Sectors

Each of the 2013 Top 40 gets a one-page Easy-Rate Scoresheet for simple comparison, and those follow various lists of the 40 sorted in different ways. Given the many ways of viewing the winners, you’ll have no trouble choosing which are right for your portfolio. The highest dividend yield is 8.7 pct and the lowest is 2.6 pct.

For the first time, Dave has preloaded all 40 of the stocks into F.A.S.T. Graphs and linked the page directly from within the eBook. Readers just click the link, then select the stock they want to see from a dropdown on the resulting page in their browser. The up-to-date graph for the selected stock will load. This is a convenient feature for readers that will remain timely all year.

Here are six observations about this year’s 40 from Dave. Note that DGR stands for dividend growth rate:

Top 40 Dividend Growth Stocks For 2013 Observations

Dave closes with thoughts on how to use dividend-growth stocks in retirement planning, relying on a helpful cistern metaphor. He suggests picturing that your retirement assets “reside in a cistern, with pipes bringing assets in and taking them out.” He says your retirement cistern has two goals:

  1. You must be able to draw enough from the cistern to fund your retirement adequately when that money is combined with other sources of income that you may have.
  2. The cistern must never go empty. In fact, it must never get even close enough to empty that you lose sleep or worry about the possibility.

With the help of this book, it won’t.

Another year, another fine addition to the annual series. Dave is selling Top 40 Dividend-Growth Stocks for 2013 in PDF form for $40 (a buck a stock). I receive no compensation if you buy it.

I wrote three years ago that this is the best dividend stock book I know. It still is, and it keeps getting better.

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  1. Bob
    Posted January 26, 2013 at 11:37 pm | Permalink

    This plan sounds a lot like the Wellington/Wellesley pair of funds. From the Wellington prospectus:

    Primary Investment Strategies
    The Fund invests 60% to 70% of its assets in dividend-paying and, to a lesser extent,
    non-dividend-paying common stocks of established large and mid-size companies. In
    choosing these companies, the advisor seeks those that appear to be undervalued but
    have prospects for improvement. These stocks are commonly referred to as value
    stocks. The remaining 30% to 40% of the Fund’s assets are invested mainly in fixed
    income securities that the advisor believes will generate a reasonable level of current
    income. These securities include investment-grade corporate bonds, with some
    exposure to U.S. Treasury and government agency bonds, and mortgage-backed

    From the Wellesely prospectus:

    Primary Investment Strategies
    The Fund invests approximately 60% to 65% of its assets in investment-grade fixed
    income securities that the advisor believes will generate a reasonable level of current
    income, including corporate, U.S. Treasury, and government agency bonds, as well as
    mortgage-backed securities. The remaining 35% to 40% of Fund assets are invested
    in common stocks of companies that have a history of above-average dividends or
    expectations of increasing dividends.

    To get the equity/bond ratio one desires is a matter of mixing those two in the right proportion.

    • Posted January 30, 2013 at 7:04 pm | Permalink

      Dave’s book isn’t a “plan” per se. It presents the basics of dividend investing and then shows his top 40 picks for the year.

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