Dividend Growth Investor Newsletter

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Thursday, July 28, 2022

26 Dividend Champions for Further Research

I generate investment ideas from different sources. 

  • I look at the list of weekly dividend increases. 
  • I also try to identify companies for research based on my everyday spending patterns. In other words, I try to unleash my inner Peter Lynch. 
  • I also review the list of dividend achievers/champions/aristocrats for bargains. 
  • From time to time, I also try to apply different screening parameters to identify companies for further research.

Today, I decided to do just that. My screening criteria were as followed:

1) A company has increased dividends for 25 years in a row

2) A company yields at least 2% today

3) The company has a 10 year annualized dividend growth of at least 6%/year

4) The company has a 1, 3 and 5 year annualized dividend growth of at least 6%/year

Ticker

Company

Dividend Streak

Dividend Yield

10 year Dividend Growth

AFL

Aflac Incorporated

40

2.89%

7.94%

AOS

A. O. Smith Corporation

28

2.05%

21.60%

APD

Air Products and Chemicals, Inc.

40

2.69%

10.11%

ATO

Atmos Energy Corporation

38

2.43%

6.47%

CNI

Canadian National Railway Company

27

2.06%

11.59%

CSVI

Computer Services, Inc.

50

2.92%

16.04%

ENB

Enbridge Inc.

26

6.38%

10.48%

ERIE

Erie Indemnity Company

32

2.31%

7.23%

FFMR

First Farmers Financial Corporation

32

2.80%

15.39%

GD

General Dynamics Corporation

31

2.28%

9.82%

GRC

The Gorman-Rupp Company

49

2.40%

8.41%

ITW

Illinois Tool Works Inc.

47

2.68%

12.89%

LANC

Lancaster Colony Corporation

59

2.48%

8.49%

LOW

Lowe's Companies, Inc.

60

2.40%

18.80%

MDT

Medtronic plc

45

3.03%

9.98%

NEE

NextEra Energy, Inc.

28

2.19%

10.84%

NJR

New Jersey Resources Corporation

26

3.26%

6.57%

PEP

PepsiCo, Inc.

50

2.76%

7.74%

PH

Parker-Hannifin Corporation

66

2.16%

10.75%

PPG

PPG Industries, Inc.

50

2.06%

7.18%

PSBQ

PSB Holdings, Inc.

29

2.13%

7.14%

SJW

SJW Group

55

2.31%

7.02%

SRCE

1st Source Corporation

34

2.73%

7.60%

TGT

Target Corporation

55

3.06%

11.13%

TROW

T. Rowe Price Group, Inc.

36

4.22%

13.29%

WTRG

Essential Utilities, Inc.

29

2.34%

7.49%


This is a list for further research, not an automatic buy recommendation of course. 

As part of my initial review, I would look at each company individually first. 


I look for:

1) A minimum streak of annual dividend increases

2) Growth in earnings per share over the past decade

3) Growth in dividends per share over the past decade

4) Trends in the dividend payout ratio

5) Business model and determining if company can grow the bottom line in the future


After a business passes through these filters, I would then have to determine the right valuation to invest at

That's the fun part, because it is dependent on various factors as well. It depends on interest rates, growth in earnings, dependability of the earnings stream, overall valuations etc. Other factors such as existing portfolio weights can also affect my decision to invest in companies. For example, I may decide against buying a stock yielding 2%, selling at a P/E of 15 and growing dividends at 7%, but may buy another stock that may appear more expensive because I want to diversify and manage risk.

You may check my analysis of General Dynamics (GD) for more information on what I look for when I review a company.

The above list was inspired by the fact that a company that yields 2% today but grows dividends at 6%/year would generate a higher dividend income over time, than a company that yields 4% today but doesn't grow dividends at more than 2% - 3%/year. This effect is particularly noticeable if you start reinvesting those dividends too.  Of course, investing is the intersection between yield and growth, purchased at the right entry price too. Life is full of trade-offs, and investing and portfolio construction are not exceptions.

In my portfolio, I try to hold companies with different yield/growth characteristics. As a result, it is a mixture of:

1) Companies that have higher yield, but I expect slower dividend growth

2) Companies in the sweet spot, which have average yields but the expectation is for an average dividend growth

3) Companies that have lower yields today, but are expected to deliver higher dividend growth over time.


Relevant Articles:

- Types of dividend growth stocks

- How to value dividend stocks