August 2024 Dividend Growth Stock Watch List

As I'm writing this blog post, it is currently Friday, July 12th. The high temperature here in Central Wisconsin is set to reach 85 degrees Fahrenheit later today. That's exactly why after spending time with my nephew, I plan on getting outside later in the afternoon to enjoy the weather.

Now that the month of July is almost half over, it would be a good time to briefly cover the dividend growth stocks that are at the top of my watch list for August.

Dividend Stock #1: American Electric Power (AEP)

First up is American Electric Power (AEP). Interested readers can find my investment thesis in this Dividend Kings article from May.

The gist of the article is that AEP's 6% to 7% annual operating EPS growth prospects remain intact. The company's balance sheet remains investment-grade, with a BBB+ credit rating from S&P. AEP's low-60% payout ratio is better than the 75% payout ratio that rating agencies like to see per The Dividend Kings' Zen Research Terminal. Finally, the $91 share price (as of July 12, 2024) represents a moderate discount to my $100+ fair value estimate.

Dividend Stock #2: Realty Income (O)

The second dividend growth stock on my watch list for August 2024 is Realty Income (O). Last month, I updated my investment thesis on O in a Seeking Alpha article.

In my view, O can likely continue delivering almost 4% annual AFFO per share growth to shareholders. The ~6% dividend yield also looks to be quite secure, with a payout ratio in the mid-70% range. Topped off with shares trading 11% below my fair value estimate of $63 (from the current $56 share price), double-digit annual total returns appear to be a strong possibility from here in my opinion.

Dividend Stock #3: Visa (V)

Wrapping things up, Visa (V) is the third dividend growth stock on my watch list for next month. Readers can find my investment thesis from late April in this Seeking Alpha article.

At the time (and still now), I believed the company had a reasonable path to keep putting up annual adjusted diluted EPS growth in the teens. The 0.8% starting yield isn't much, but it's backed up by a payout ratio in the low-20% range. V also flexes an AA- credit rating from S&P. Finally, shares could be worth over $300 apiece. Against the current $266 share price (as of July 12), that's a compelling value for my money.

Concluding Thoughts:

So, that concludes my discussion of my highest conviction picks that I'd like to add to next month. Each of these pick are undervalued enough that I almost certainly don't see myself not buying them. The only exception would be if they somewhat rally and other world-class holdings in my portfolio experience unjustified selloffs.

Discussion:

Are any of AEP, O, and/or V on your watch list for August 2024?

If not, what dividend growth stocks are piquing your interest?

I appreciate your readership and welcome your comments below!