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%
|
These are not automatic buy recommendations by any shape or form. The intelligent dividend investor should use that screen only as a first step for their process. It is merely a step to narrow down a large list of companies down to a more manageable level.
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
