In order to come up with a list of companies for further research, I used the following entry criteria:
1) A ten year minimum for annual dividend increases ( being a champion already helps in pre-qualifying this criteria)
2) Forward P/E ratio below 20
3) Dividend Payout Ratio below 60%
4) Companies that have managed to grow earnings per share over the past decade
5) Companies which have achieved a more than nominal dividend growth over the past decade
I applied those basic criteria on the Dividend Champions list, maintained by David Fish and came up with the following group of companies for further research:
|
Symbol |
Name |
Consecutive Years of
Annual Dividend Increases |
Dividend Yield |
Share Price |
Forward P/E |
Forward Dividend
Payout Ratio |
|
AFL |
AFLAC Inc. |
35 |
1.92% |
89.73 |
13.27 |
25.44% |
|
BDX |
Becton Dickinson &
Co. |
46 |
1.31% |
222.08 |
20.43 |
26.86% |
|
CBSH |
Commerce Bancshares |
49 |
1.52% |
56.09 |
20.32 |
30.80% |
|
CBU |
Community Bank System |
25 |
2.41% |
53.88 |
20.80 |
50.19% |
|
CPKF |
Chesapeake Financial
Shares |
26 |
1.27% |
30 |
14.56 |
18.45% |
|
CSVI |
Computer Services Inc. |
46 |
2.44% |
47.1 |
19.63 |
47.92% |
|
CTBI |
Community Trust Banc. |
37 |
2.70% |
47.75 |
16.93 |
45.74% |
|
EV |
Eaton Vance Corp. |
37 |
1.97% |
58.34 |
18.94 |
37.34% |
|
GD |
General Dynamics |
26 |
1.60% |
204.7 |
20.82 |
33.37% |
|
JNJ |
Johnson & Johnson |
55 |
2.31% |
141.71 |
19.47 |
45.05% |
|
LEG |
Leggett & Platt
Inc. |
46 |
2.92% |
47.9 |
19.31 |
56.45% |
|
LOW |
Lowe's Companies |
55 |
1.60% |
94.74 |
20.73 |
33.26% |
|
MDT |
Medtronic plc |
40 |
2.08% |
85.54 |
17.93 |
37.32% |
|
PNR |
Pentair Ltd. |
42 |
1.90% |
72.66 |
20.58 |
39.09% |
|
PPG |
PPG Industries Inc. |
46 |
1.39% |
118.92 |
20.19 |
28.01% |
|
RPM |
RPM International Inc. |
44 |
2.20% |
54.5 |
18.86 |
41.52% |
|
SCL |
Stepan Company |
50 |
1.03% |
79.41 |
18.30 |
18.89% |
|
SRCE |
1st Source Corp. |
30 |
1.47% |
50.4 |
19.53 |
28.68% |
|
THFF |
First Financial Corp. |
30 |
2.20% |
45.55 |
16.81 |
36.90% |
|
TMP |
Tompkins Financial
Corp. |
31 |
2.23% |
80.67 |
18.17 |
40.54% |
|
TROW |
T. Rowe Price Group |
31 |
2.10% |
107.23 |
17.90 |
37.56% |
|
UGI |
UGI Corp. |
30 |
2.04% |
47.55 |
18.79 |
38.34% |
|
UMBF |
UMB Financial Corp. |
26 |
1.42% |
71.95 |
19.71 |
27.95% |
|
WBA |
Walgreens Boots
Alliance Inc. |
42 |
2.08% |
72.92 |
13.07 |
27.24% |
The additional review should entail analyzing each company in more detail, and determining if the trends in earnings and dividends will continue into the future.
This evaluation is more art than science, and is highly subjective. Investing is an endeavor where two perfectly logical and rational individuals can have the same data, and still reach starkly different conclusions. After all, there is a buyer and a seller behind every stock transaction - and they both consider themselves smarter than the other party!
This decision is further complicated by existing stock holdings. For example, an investor who finds Walgreens Booth Alliance to be the best value on the list, may still refrain from investing in the company, if they already own too much of it.
I believe that success in dividend investing comes down to regular investing, and having a long-term buy and hold mindset. Most money is made by slowly building a diversified portfolio of quality companies by putting money to work every single month, and then sitting tight and letting the power of compounding do the heavy lifting for you.
What companies are you considering right now? Please feel free to write to me at dividendgrowthinvestor at gmail dot com
Relevant Articles:
- Dividend Champions, Contenders & Challengers: The most complete list of US dividend growth stocks available
- How to value dividend stocks
- How to become a successful dividend investor
- What I learned from analyzing my investment record