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Dividend Contenders Smackdown XXXV

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 high (2011) Dividend Growth Rate with low Beta and, last month, by combining a high (2012) Dividend Growth Rate with low Free Cash Flow Payout and high Return on Equity, two columns that were added at the end of December.

(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 start with another new column added at the end of 2012 and focus on metrics that are generally better when they're on the low side. 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 new Debt/Equity Ratio (column AJ), low to high. Eliminating companies with as much Debt as Equity (Ratios of 1.00 or higher) or those that were "n/a" cut the list of initial candidates to 118 companies.

Step 2: Sort the companies by their Trailing Twelve Months' Price/Earnings Ratio (column V), low to high. Eliminating companies that had P/Es above 16 (or had no number) cut the list to 44 companies.

Step 3: Sort the remaining companies by their 5-year Beta (column CF), low to high. Dropping those at or above 1.00 cut the list to 31 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 23 companies.

Step 5: Sort the companies by their Most Recent (Percentage) Increase (column L), high to low, and eliminate any company with a figure below 2%. That cut the list to 22 companies, which appear below.

(Note that I've sorted the companies back into alphabetical order.)

Company

Ticker

No.

1/31

Div.

MR%

TTM

Debt/

5-yr

Name

Symbol

Yrs

Price

Yield

Inc.

P/E

Equity

Beta

ACE Limited

(NYSE:ACE)

20

85.33

2.30

4.26

10.86

0.19

0.73

Alterra Capital Holdings Ltd.

(NASDAQ:ALTE)

12

30.47

2.10

14.29

13.73

0.15

0.97

Arrow Financial Corp.

(NASDAQ:AROW)

19

24.40

4.10

2.00

13.26

0.19

0.41

Auburn National Bancorp

(NASDAQ:AUBN)

11

21.11

3.88

2.50

12.27

0.71

0.11

Axis Capital Holdings Ltd.

(NYSE:AXS)

11

38.27

2.61

4.17

8.06

0.17

0.83

Cardinal Health Inc.

(NYSE:CAH)

17

43.81

2.51

15.79

13.78

0.46

0.78

Community Bank System

(NYSE:CBU)

20

28.40

3.80

3.85

14.72

0.92

0.61

Cullen/Frost Bankers

(NYSE:CFR)

19

58.89

3.26

4.35

15.58

0.34

0.66

Enterprise Bancorp Inc.

(NASDAQ:EBTC)

19

17.23

2.67

4.55

13.78

0.08

0.95

First Financial Corp.

(NASDAQ:THFF)

24

30.17

3.18

2.13

11.60

0.12

0.65

John Wiley & Sons Inc.

(NYSE:JW.A)

19

38.30

2.51

20.00

12.20

0.64

0.72

Laclede Group Inc.

(NYSE:LG)

10

39.92

4.26

2.41

14.26

0.67

0.06

Landmark Bancorp Inc.

(NASDAQ:LARK)

11

19.75

3.66

5.00

9.59

0.37

0.27

Microsoft Corp.

(NASDAQ:MSFT)

10

27.45

3.35

15.00

15.08

0.20

0.97

National Bankshares

(NASDAQ:NKSH)

13

33.84

3.37

7.55

13.12

0.00

0.48

Nippon Tele&Tele

(NYSE:NTT)

11

21.06

4.39

12.47

10.17

0.54

0.35

Norwood Financial

(NASDAQ:NWFL)

15

30.04

4.13

3.33

11.38

0.30

0.14

NTT DoCoMo Inc.

(NYSE:DCM)

11

15.17

4.75

4.76

12.64

0.05

0.23

PartnerRe Limited

(NYSE:PRE)

19

87.69

2.83

3.33

5.94

0.12

0.52

Southside Bancshares

(NASDAQ:SBSI)

18

21.14

3.78

16.69

10.16

0.22

0.63

Span-America Medical

(NASDAQ:SPAN)

14

19.01

2.63

13.64

10.68

0.00

0.66

Teva Pharmaceutical Ind.

(NYSE:TEVA)

13

37.99

2.72

14.76

15.57

0.60

0.36

Conclusion

The results appear to be heavily dominated by small banks and foreign corporations, with a few more familiar names mixed in. Be sure to consider any tax implications of investing in foreign ADRs (American Depository Receipts). 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 Contenders Smackdown XXXV