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.
|
34
|
17.29
|
2.50%
|
40.98%
|
42.18
|
15.15%
|
||
|
Johnson & Johnson
|
52
|
17.4
|
2.60%
|
46.36%
|
105.06
|
10.84%
|
||
|
AFLAC Inc.
|
32
|
9.71
|
2.60%
|
24.45%
|
61.94
|
16.82%
|
||
|
Weyco Group Inc.
|
33
|
18.33
|
2.80%
|
46.91%
|
29.67
|
14.55%
|
|
|
|
ExxonMobil Corp.
|
32
|
11.73
|
2.90%
|
34.72%
|
93.21
|
9.64%
|
||
|
Kimberly-Clark Corp.
|
42
|
20.93
|
3.00%
|
59.47%
|
118.28
|
9.16%
|
||
|
Questar Corp.
|
35
|
19.39
|
3.10%
|
57.58%
|
25.59
|
6.17%
|
|
|
|
Tompkins Financial Corp.
|
28
|
15.61
|
3.40%
|
46.67%
|
56.18
|
6.25%
|
|
|
|
Chevron Corp.
|
27
|
10.43
|
4.10%
|
39.41%
|
113.25
|
10.55%
|
||
|
Helmerich & Payne Inc.
|
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
Do you invest the dividend earned in the same stock automatically?
ReplyDeleteThank you for another great post :-)
ReplyDeleteHave you considered initiating positions in Ace and Albemarle? Maybe also Alliance Ressource Partners could fit.
I wonder if you look at the P/B value and to ROE when choosing a stock.
ReplyDeleteThese are 2 values I like to watch.
Cheers!
I think DGI initial screen is good. You can always apply other screens on top of your first to further filter the list depending on your focus (quality, growth, value, etc.)
DeleteHP also has very low levels of debt, making the oil price downturn easier to weather. I've been buying some this past month.
ReplyDelete-RBD
Hey DGI,
ReplyDeleteWhen I first discovered the concept of dividend growth investing 3 years ago, your blog was one of the first sites I found through my google searches. I am not growing my own dividend machine and still enjoying your posts.
This one is very clear and these 10 aristocrats are always worth a look.
I am still building my positions in JNJ, XOM and CVX. What I like in JNJ is that it cumulates the benefits of being a top global healthcare play with leading positions in Pharma, Med Devices and Consumer health and a global consumer brand that will benefit from the emerging middle class in Asia, Latin America and other emerging markets.
All the best for 2015,
LTI
DGI,
ReplyDeleteLong CVX, KMB, XOM, AFL, JNJ. HP looks promising at current valuations. You and Dividend Mantra listed EV today so I will investigate.
Happy New Year!
KeithX
I like HP as one of the best-kept secrets for investors, and with the rapid acceleration of dividends the past 18 months, coupled with the 'crisis' in the old path it yields about 4%. I made the case for HP in an article last February, which interested viewers, can read here: Drill, Baby, Drill
ReplyDeletehttp://seekingalpha.com/article/2016701-helmerich-and-payne-drill-baby-drill-for-growth-and-dividends
This company dominates the U.S. Land Drilling segment, with their proprietary drill rigs commanding premium prices. The demand for oil & gas will only increase, and these short-term drops in commodity prices offer opportunities to initiate positions in many well-run companies in this space, with HP being just one of those.
DGI….
ReplyDeleteNice article, as usual.
Happy New Year.
Respectfully,
Dennis McCain
dennismccain.weebly.com
Thanks for the list, already long in CVX, TMP and JNJ and always have my eyes peeled for more.
ReplyDeleteI did not know some of the holdings you enumerated: EV, WEYS, STR and TMP. Thanks for the list, I will do some researching about them.
ReplyDeleteBest wishes,
CZD.
Hi DGI,
ReplyDeleteThanks very much for your sober and methodical explanations and thoughts. I really find your suggestions most thoughtful. Just a clarification on the dividend growth rate: are the percentages you note (e.g. AFL at 16.82%) average annualized growth for the past 10 years or is it the simple size of the growth from 10 years ago until today?
Many thanks again for your blog.