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Dividend Champions Smackdown XXXIV

In the most recent installments of the Smackdown series, I screened the Dividend Champions (which can be found here: http://dripinvesting.org/Tools/Tools.asp ) using a "back to basics" approach and, last month, by combining a high Dividend Growth Rate and low volatility to look for a "smoother" ride.

(Note that I have separated the Champions, Contenders, and Challengers into different articles to fit more closely into the format preferred by Seeking Alpha. Champions are companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years. I use the same Roman numeral for all three articles.)

This month, I decided to focus on new columns added at the end of 2012 (or others that they affect). So I screened as follows:

Step 1: After eliminating companies that had not increased their dividend in more than a year and those that had agreed to be acquired, I sorted by the 5-year Dividend Growth Rate (column AN), high to low. Unlike last month (when I also started with this column), the calculation is now based on 2012 Dividends Paid, which appears as column AQ and measures the compound annual growth rate of the dividends per share since 2007 (column AW). Eliminating companies with DGRs below the Champions' average of 7.0% cut the list of candidates to 52 companies.

Step 2: Sort the companies by FCF% Payout (column T), low to high. Note that the FCF% Payout is based on new column AB, the Trailing Twelve Months' Price/Free Cash Flow ratio. Eliminating companies that had paid out more than 100% of Free Cash Flow (or had no number) cut the list to 28 companies.

Step 3: Sort the remaining companies by new column AC, the Trailing Twelve Months' Return On Equity, high to low. Dropping those below 20% cut the list to 13 candidates.

Step 4: Sort the companies by their Yield (column I), high to low, and eliminate any company with a yield below 2%. That cut the list to 6 companies, which appear below.

(Note that I've sorted each group back into alphabetical order.)

Company

Ticker

No.

12/31

Div.

FCF%

TTM

DGR

Name

Symbol

Yrs

Price

Yield

Payout

ROE

5-yr

AFLAC Inc.

(AFL)

30

53.12

2.64

4.61

20.12

10.9

Becton Dickinson & Co.

(BDX)

41

78.19

2.53

46.21

24.76

13.5

ExxonMobil Corp.

(XOM)

30

86.55

2.63

93.62

27.48

9.7

McCormick & Co.

(MKC)

27

63.53

2.14

65.40

22.88

9.2

T. Rowe Price Group

(TROW)

25

65.12

2.09

78.40

23.44

14.9

Wal-Mart Stores Inc.

(WMT)

38

68.23

2.33

58.59

23.52

13.5

Conclusion

As usual, there are several familiar names, a testament to their high quality in terms of various measurements of value, including some newly installed metrics. As always, please consider this no more than a starting point for more in-depth research.

As an extra step, I'm including one of Chuck Carnevale's F.A.S.T. Graphs for the company that appears to be the most undervalued, as indicated by its price line being in the green-shaded earnings area, just below.

(click to enlarge)

Source: Dividend Champions Smackdown XXXIV