A dividend champion is a company which has a 25 year record of annual dividend increases. There are only 134 such companies in the US today. I believe that becoming a dividend champion is no accident, and it is a result of a strong business that has generated earnings growth for a long period of time. These are the types of businesses I like to study, and potentially consider at the right time for my dividend portfolio. I believe that the dividend champions list offers a more complete picture than the dividend aristocrats.
I last updated the list of dividend champions through December 31, 2018. I decided to update the list of dividend champions after the untimely passing of David Fish in May 2018.
Today, I am going to share with you the Dividend Champions list for 2020. You can download the 2020 Dividend Champions List from this link.
As a starting point, there were 129 companies in the dividend champions list at the end of 2019.
There were several companies that ended up leaving the Dividend Champions list in 2019.
Three of these companies were acquired – notably Vectren (59), Connecticut Water Service (48) and Bemis (35). The number in brackets is the number of years of annual dividend increases for each of those three companies.
There were eight companies that were added to the list in 2019.
Albermarle (ALB)
Caterpillar (CAT)
Enterprise Bancorp (EBTC)
Essex Property Trust (ESS)
Matthews International (MATW)
Northeast Indiana Bancorp (NIDB)
Realty Income (O)
Ross Stores (ROST)
All of this brings the list of dividend champions to 134 companies at the end of 2019.
The following companies should be able to become dividend champions by the end of 2020:
International Business Machines (IBM)
Lincoln Electric Holdings (LECO)
NextEra Energy (NEE)
Polaris Industries (PII)
RenaissanceRe Holdings (RNR)
Southside Bancshares (SBSI)
There are a few companies such as Helmerich & Payne (HP), whose annual dividends are increasing in 2019, despite not having a dividend hike since 2018. If the dividend is kept unchanged, chances are the company will lose its dividend champion status.
Thank you for reading!
Relevant Articles:
- Dividend Champions, Contenders & Challengers: The most complete list of US dividend growth stocks available
- October 2018 Dividend Champions List
- December 2018 Dividend Champions List
- RIP David Fish
Showing posts with label dividend champions. Show all posts
Showing posts with label dividend champions. Show all posts
Monday, January 6, 2020
Thursday, June 20, 2019
Twenty-Four Attractively Valued Dividend Champions for Further Research
I monitor the list of dividend champions regularly, using my screening criteria. This is helpful to identify quality companies available at good prices, which may be good additions to my portfolio at the right time.
My screening process helps me narrow down the list of dividend champions to a more manageable level for further research. This of course is the first phase in company selection process; once the list is narrowed down to a more manageable level,
The screening criteria I used includes the following factors:
1) A dividend streak of annual dividend increases exceeding 25 years
This is understandable, since to be a dividend champion, a company needs to have increased dividends for at least 25 years in a row. I view a long streak of annual dividend increases as an indicator of business quality. After all, only a certain type of company can afford to grow the business, while also showering shareholders with more cash each year for over a quarter of a century. A long streak of dividend increases is a testament to a consistency in a business, strong competitive advantages, and an industry that quietly builds wealth to long-term shareholders over time.
2) A forward P/E ratio below 20
I want to remain disciplined, and focus on companies which are not overvalued. I do not want to overpay for future growth, as I also do not want to buy a cheap company that doesn’t grow either. To me valuation is important, because even the best company in the world may not be worth purchasing at an inflated price .If you overpay for a security, future returns could suffer, because you lock in a lower yield at the start.
3) A forward dividend payout ratio below 60%
I want to have a margin of safety in the dividend payment, which is what a lower dividend payout ratio helps to identify. I am after companies that reinvest a portion of earnings to grow the business and distributes the excess to shareholders. An adequate payout ratio provides a buffer in case there is some short term fluctuations in earnings.
4) Annual dividend growth exceeding 5% over the past five and ten years
Historical dividend growth has been around 5% - 6% on US stocks over the past 90 years. I wanted to find companies which consistently grow dividends, and do not materially decrease them over time. I also screened out companies whose last raise was less than 5%. Again, I value consistency in dividend growth.
5) A history of rising earnings per share over the past decade
Rising earnings per share are the fuel behind future dividend increases. There is a natural limit to dividend growth, if a company does not grow its bottom line. A company that grows earnings per share can afford to increase dividends, and reinvest more into the business. This also provides an additional margin of safety in the dividends, because a company has more tools within its disposal to tackle things such as a temporary high payout ratio. By growing earnings, a company can simply grow itself out of a higher payout ratio, as dividends grow slightly slower until the payout is normalized.
As a result of running this screen, I ended up with a list of the following dividend champions for further research:
I just wanted to caution you that this is not an automatic recommendation to buy or sell securities. I am not a financial advisor, just someone who writes about dividend investing. Any decision you make about investments is solely your responsibility. This means that each company needs to be analyzed in detail, both from a quantitative and qualitative standpoint. In addition, just because a company looks attractively valued today, that doesn’t mean that this company cannot get cheaper from here.
Furthermore, I am sharing a rudimentary process for screening the list of dividend champions on a regular basis, in order to show investors how I go about identifying companies, and build a diversified portfolio over time. I have found that the ability to stick to a process, invest regularly, and to keep holding through patiently thick or thin is my edge in investing. By sharing my experience, I am hopeful to inspire you into developing your own methodology, and use it to work towards your financial objectives.
Relevant Articles:
- How to determine if your dividends are safe
- 2019 Dividend Champions List
- Stagnant earnings create a risky environment for dividend investors
- Investing is part art, part science
My screening process helps me narrow down the list of dividend champions to a more manageable level for further research. This of course is the first phase in company selection process; once the list is narrowed down to a more manageable level,
The screening criteria I used includes the following factors:
1) A dividend streak of annual dividend increases exceeding 25 years
This is understandable, since to be a dividend champion, a company needs to have increased dividends for at least 25 years in a row. I view a long streak of annual dividend increases as an indicator of business quality. After all, only a certain type of company can afford to grow the business, while also showering shareholders with more cash each year for over a quarter of a century. A long streak of dividend increases is a testament to a consistency in a business, strong competitive advantages, and an industry that quietly builds wealth to long-term shareholders over time.
2) A forward P/E ratio below 20
I want to remain disciplined, and focus on companies which are not overvalued. I do not want to overpay for future growth, as I also do not want to buy a cheap company that doesn’t grow either. To me valuation is important, because even the best company in the world may not be worth purchasing at an inflated price .If you overpay for a security, future returns could suffer, because you lock in a lower yield at the start.
3) A forward dividend payout ratio below 60%
I want to have a margin of safety in the dividend payment, which is what a lower dividend payout ratio helps to identify. I am after companies that reinvest a portion of earnings to grow the business and distributes the excess to shareholders. An adequate payout ratio provides a buffer in case there is some short term fluctuations in earnings.
4) Annual dividend growth exceeding 5% over the past five and ten years
Historical dividend growth has been around 5% - 6% on US stocks over the past 90 years. I wanted to find companies which consistently grow dividends, and do not materially decrease them over time. I also screened out companies whose last raise was less than 5%. Again, I value consistency in dividend growth.
5) A history of rising earnings per share over the past decade
Rising earnings per share are the fuel behind future dividend increases. There is a natural limit to dividend growth, if a company does not grow its bottom line. A company that grows earnings per share can afford to increase dividends, and reinvest more into the business. This also provides an additional margin of safety in the dividends, because a company has more tools within its disposal to tackle things such as a temporary high payout ratio. By growing earnings, a company can simply grow itself out of a higher payout ratio, as dividends grow slightly slower until the payout is normalized.
As a result of running this screen, I ended up with a list of the following dividend champions for further research:
Name
|
Symbol
|
Number
of Annual Dividend Increases
|
Last
Price
|
Annual Div Rate
|
Annual Div Yield
|
Dividend
Payout Ratio
|
Forward
P/E
|
5yr Dividend Growth
|
10yr
Dividend Growth
|
Most
Recent Increase
|
A.O.
Smith Corp.
|
AOS
|
25
|
45.25
|
0.88
|
1.94%
|
32%
|
16.70
|
27.00
|
19.94
|
22.22
|
BancFirst
Corp. OK
|
BANF
|
25
|
57.56
|
1.2
|
2.08%
|
32%
|
15.27
|
9.53
|
8.54
|
42.86
|
Carlisle
Companies
|
CSL
|
42
|
136.68
|
1.6
|
1.17%
|
22%
|
18.42
|
12.89
|
9.88
|
8.11
|
EV
|
38
|
41.93
|
1.4
|
3.34%
|
44%
|
13.31
|
9.31
|
7.78
|
12.90
|
|
Franklin
Electric Co.
|
FELE
|
27
|
45.8
|
0.58
|
1.27%
|
24%
|
19.08
|
8.92
|
6.57
|
20.83
|
General
Dynamics
|
GD
|
28
|
173.59
|
4.08
|
2.35%
|
35%
|
14.82
|
10.63
|
10.48
|
9.68
|
Genuine
Parts Co.
|
GPC
|
63
|
102.92
|
3.05
|
2.96%
|
51%
|
17.30
|
5.69
|
6.33
|
5.90
|
Gorman-Rupp
Company
|
GRC
|
46
|
30.66
|
0.54
|
1.76%
|
32%
|
18.04
|
9.10
|
7.14
|
8.00
|
W.W.
Grainger Inc.
|
GWW
|
48
|
271.87
|
5.76
|
2.12%
|
32%
|
15.10
|
8.35
|
13.21
|
5.88
|
ITW
|
44
|
149.21
|
4
|
2.68%
|
50%
|
18.72
|
16.45
|
11.25
|
28.21
|
|
Johnson
& Johnson
|
JNJ
|
57
|
140.23
|
3.8
|
2.71%
|
44%
|
16.34
|
6.45
|
7.03
|
5.56
|
LOW
|
56
|
99.31
|
2.2
|
2.22%
|
36%
|
16.39
|
21.22
|
18.36
|
17.07
|
|
MDT
|
41
|
97.96
|
2
|
2.04%
|
39%
|
19.02
|
12.20
|
11.88
|
8.70
|
|
McGrath
Rentcorp
|
MGRC
|
27
|
60.98
|
1.5
|
2.46%
|
44%
|
18.04
|
6.03
|
5.08
|
10.29
|
MMM
|
61
|
171.86
|
5.76
|
3.35%
|
55%
|
16.32
|
16.45
|
10.52
|
5.88
|
|
Parker-Hannifin
Corp.
|
PH
|
63
|
166.56
|
3.52
|
2.11%
|
30%
|
14.30
|
10.56
|
12.32
|
15.79
|
PPG
|
47
|
114.68
|
1.92
|
1.67%
|
31%
|
18.38
|
8.98
|
5.94
|
6.67
|
|
Stepan
Company
|
SCL
|
51
|
90.84
|
1
|
1.10%
|
20%
|
17.85
|
7.31
|
8.09
|
11.11
|
SEI
Investments Company
|
SEIC
|
28
|
54.34
|
0.66
|
1.21%
|
21%
|
17.53
|
11.38
|
14.87
|
10.00
|
1st
Source Corp.
|
SRCE
|
32
|
45.25
|
1.08
|
2.39%
|
31%
|
12.93
|
9.20
|
6.18
|
8.00
|
Stanley
Black & Decker
|
SWK
|
51
|
144.56
|
2.64
|
1.83%
|
31%
|
16.93
|
5.44
|
7.43
|
4.76
|
TROW
|
33
|
107.4
|
3.04
|
2.83%
|
44%
|
15.48
|
13.00
|
11.30
|
8.57
|
|
United
Technologies
|
UTX
|
25
|
126.62
|
2.94
|
2.32%
|
37%
|
16.01
|
5.25
|
7.74
|
5.00
|
WBA
|
43
|
52.8
|
1.76
|
3.33%
|
29%
|
8.64
|
7.32
|
15.01
|
10.00
|
I just wanted to caution you that this is not an automatic recommendation to buy or sell securities. I am not a financial advisor, just someone who writes about dividend investing. Any decision you make about investments is solely your responsibility. This means that each company needs to be analyzed in detail, both from a quantitative and qualitative standpoint. In addition, just because a company looks attractively valued today, that doesn’t mean that this company cannot get cheaper from here.
Furthermore, I am sharing a rudimentary process for screening the list of dividend champions on a regular basis, in order to show investors how I go about identifying companies, and build a diversified portfolio over time. I have found that the ability to stick to a process, invest regularly, and to keep holding through patiently thick or thin is my edge in investing. By sharing my experience, I am hopeful to inspire you into developing your own methodology, and use it to work towards your financial objectives.
Relevant Articles:
- How to determine if your dividends are safe
- 2019 Dividend Champions List
- Stagnant earnings create a risky environment for dividend investors
- Investing is part art, part science
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