Best Dividend Stocks for 2015

My goal is to find companies which pay a decent dividend today, sell at attractive valuations and can grow those dividends over time from increasing profits. If I manage to find companies that can regularly increase dividends, I would be able to live off dividends in retirement and not have to worry about inflation or having to withdraw money from my principle. In order to find good dividend stocks for further research, I start with the list of dividend champions. This list is maintained by Dave Fish, and shows companies which have managed to increase dividends for at least 25 years in a row. This is a big achievement, since it includes several recessions, wars, and world changes. If a company’s business model has managed to withstand the pressures of time, competition and changing world business environment, I want to study it for potential inclusion into my dividend portfolio. In addition, if I find that company selling at attractive valuations, I might be more inclined to act and buy, rather than sit and monitor on the sidelines.

Using the list of dividend champions, I ran the following entry criteria:

1) P/E ratio of 20 or below
2) Dividend yields above 2.50%
3) Dividend payout ratio (DPR) below 60%
4) 10 year dividend growth rate of at least 5%
5) One and three year dividend growth rates above 5%

Name	Symbol	Yrs Div Increase	P/E	Yield	DPR	PRICE	10 yr DG	Analysis
Eaton Vance Corp.	EV	34	17.29	2.50%	40.98%	42.18	15.15%	Analysis of EV
Johnson & Johnson	JNJ	52	17.4	2.60%	46.36%	105.06	10.84%	Analysis of JNJ
AFLAC Inc.	AFL	32	9.71	2.60%	24.45%	61.94	16.82%	Analysis of AFL
Weyco Group Inc.	WEYS	33	18.33	2.80%	46.91%	29.67	14.55%
ExxonMobil Corp.	XOM	32	11.73	2.90%	34.72%	93.21	9.64%	Analysis of XOM
Kimberly-Clark Corp.	KMB	42	20.93	3.00%	59.47%	118.28	9.16%	Analysis of KMB
Questar Corp.	STR	35	19.39	3.10%	57.58%	25.59	6.17%
Tompkins Financial Corp.	TMP	28	15.61	3.40%	46.67%	56.18	6.25%
Chevron Corp.	CVX	27	10.43	4.10%	39.41%	113.25	10.55%	Analysis of CVX
Helmerich & Payne Inc.	HP	42	10.41	4.40%	42.57%	67.19	23.31%

Those ten companies are not automatic buys however. This is just the first part in quantitatively reducing the number of companies for research down to a more manageable level. Investors should review financials for each company and try to understand how they make money, and whether they can keep growing earnings and dividends over time.

I also view some companies like Helmerich & Payne (HP) as a potential contrarian plays, if energy prices recover in 2015 – 2016. However, H&P always paid a low portion of earnings to shareholders, which is why this otherwise cyclical company was able to increase dividends for 42 years in a row.

We also all know that a dividend portfolio should have adequate diversification in the number of companies. It also takes time to build a dividend machine that will shower the investor with cash in the future. I have been building my dividend machine for 7 years now, and I still have a lot of work to do, before it potentially covers my expenses some time around 2018. That's why the intelligent dividend investor should keep running their screen regularly, expand it to potentially cover other dividend growth stocks such as dividend contenders, and always be on the lookout for hidden dividend gems.

Full Disclosure: Long CVX, KMB, XOM, AFL, EV, JNJ

Relevant Articles:

- Dividend Champions - The Best List for Dividend Investors
- My Entry Criteria for Dividend Stocks
- Why do I use a P/E below 20 for valuation purposes?
- Dividend Investing for Financial Independence
- My Dividend Goals for 2014 and after