2 Top Value Stocks With Huge Dividend Growth Potential

One of my favorite ways to get a feel for a stock's dividend potential is to take its dividend yield and divide that by its payout ratio. This calculation shows the maximum yield possible if a company were to pay out all the profit generated each quarter.

While highly unscientific, this little thought exercise can be a great way to find stocks that pay healthy dividends and are paired with lower payout ratios -- thus, identifying companies with high dividend potential. When talking about "healthy" yields with regard to dividend growth investing, I generally mean stocks that do two things: increase their dividend each year and have a payout ratio below 50%.

Together, these two items show a balance between returning cash to shareholders and funding growth within the company, which has led to jaw-dropping dividend returns for investors over the long term. Today, we will look at two value companies that beautifully fit this healthy dividend mold and are available to investors at cheap valuations.

Source Fool.com