Dividend Challengers Smackdown XXXV

|
Includes: DFZ, MHLD, RTN, STE, SXT, THG, TRV, UTMD
by: David Fish

Dividend Challengers 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 91 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 31 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 18 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 12 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 8 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

Hanover Insurance Group

(NYSE:THG)

8

41.56

3.18

10.00

12.79

0.34

0.55

Maiden Holdings Ltd.

(NASDAQ:MHLD)

5

10.17

3.54

12.50

9.97

0.32

0.47

R.G. Barry Corp.

(NASDAQ:DFZ)

5

13.38

2.69

12.50

11.06

0.32

0.22

Raytheon Company

(NYSE:RTN)

8

52.68

3.80

16.28

9.32

0.59

0.73

Sensient Technologies

(NYSE:SXT)

7

38.10

2.31

4.76

15.18

0.31

0.85

Steris Corp.

(NYSE:STE)

8

37.73

2.01

11.76

14.85

0.49

0.71

Travelers Companies

(NYSE:TRV)

8

78.46

2.35

12.20

12.49

0.25

0.68

Utah Medical Products

(NASDAQ:UTMD)

9

40.20

2.44

2.08

15.17

0.31

0.17

Click to enlarge

Conclusion

Aside from Raytheon, most of these names haven't come up in recent Smackdowns. That may be an indication that the low debt, Beta, and P/E figures mark these as safe but boring potential investments, but sometimes "boring is beautiful." 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

Disclosure: I am long RTN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.