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In my previous posts (here and here), I tried to determine if the five stocks that have the highest dividend growth record and the highest dividend yield, among the stocks included in the S&P 500 Dividend Aristocrats index are currently a bargain.

In this article, I tried to determine if the five stocks that have the highest EPS growth among the stocks included in the S&P 500 Dividend Aristocrats index are currently a bargain. The Dividend Aristocrats are S&P 500 constituents that have increased their dividend payouts for 25 consecutive years.

In this article, I will give the corresponding fundamental parameters for these five companies and my own opinion about them. Nonetheless, these data and my opinion should only serve as a basis for further research. All the data for this article were taken from Yahoo Finance and finviz.com on February 10.

The table and the chart below present the top five highest EPS growth stocks, their forward annual dividend rate, the forward yield, the payout ratio and the dividend rate of growth for the past five years.

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The McGraw-Hill Companies, Inc. (MHP)

The McGraw-Hill Companies, Inc. provides information services for the financial, commodities and commercial, and education markets worldwide.

McGraw-Hill has a trailing P/E of 15.46, a very low forward P/E of 11.23, and the PEG ratio is also very low at 0.94. The price to free cash flow for the trailing 12 months is at 20.94, and the average annual earnings growth estimates for the next 5 years is quite high at 16.37%. The forward annual dividend yield is at 2.62%, and the payout ratio is only 37%. The annual rate of dividend growth over the past five years was at 4.5%.

MHP has a total cash per share of $4.48 and it is expected to post a profit of $3.45 a share in the current year and $3.80 in the next year, which should be more than enough to sustain dividend payments of $1.12. %. Analysts recommend the stock -- among the nine analysts covering the stock, two rate it as a strong buy, five rate it as a buy and two rate it as a hold.

MHP will report its latest quarterly financial results on February 12. MHP is expected to post a profit of $0.72 a share, a 14.3% rise from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

The table below presents the compound annual growth rate (OTCPK:CAGR) of holding the stock for the last five years, ten years and twenty years. The returns without dividends (capital gains) and with dividends are shown separately, in order to emphasize the importance of the dividend yield.

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Holding the MHP stock during the last five years has given an average annual return of 3.5%, without the dividends the average annual return would be 1.2%. Holding the MHP stock during the last ten years has given an average annual return of 6.4%, and during the last twenty years an average annual return of 11.6

The MHP stock has declined 26.9% since the beginning of the month, after the government concluded that Standard & Poor's would have to pay a settlement of upwards of $1 billion, which is more than its parent company, McGraw-Hill, earned last year. McGraw-Hill brought in profits of $911 million last year. The government believes that Standard & Poor's, the bond rating agency, was complicit in the collapse of Wall Street by giving fraudulently high ratings to mortgage-backed securities.

Despite the current Standard & Poor's scandal, the cheap valuation metrics, the solid dividend, the long history of steadily increasing dividend, and the strong EPS growth prospects are all factors that make MHP stock quite attractive.

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Data: Yahoo Finance

MHP Dividend Yield Chart

MHP Dividend Yield data by YCharts

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Chart: finviz.com

Ecolab Inc. (NYSE:ECL)

Ecolab Inc. develops and markets programs, products, and services for the hospitality, foodservice, healthcare, industrial, and energy markets.

Ecolab has a trailing P/E of 38.55 and a forward P/E of 20.78. The average annual earnings growth estimates for the next 5 years is quite high at 16.04%. The forward annual dividend yield is at 1.24%, and the payout ratio is only 43%. The annual rate of dividend growth over the past five years was quite high at 12.1%.

The stock price is 1.55% above its 20-day simple moving average, 2.68% above its 50-day simple moving average and 10.46% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend. Analysts recommend the stock -- among the seventeen analysts covering the stock, seven rate it as a strong buy, six rate it as a buy and four rate it as a hold.

ECL has a total cash per share of $1.11, and it is expected to post a profit of $2.98 a share in the current year and $3.58 in the next year, which should be more than enough to sustain dividend payments of $0.92.

ECL will report its latest quarterly financial results on February 25. ECL is expected to post a profit of $0.89 a share, a 27.1% rise from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

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Holding the ECL stock during the last five years has given an average annual return of 11.2%, without the dividends the average annual return would be 9.1%. Holding the ECL stock during the last ten years has given a nice average annual return of 13.1%, and during the last twenty years a very high average annual return of 17.1%.

In my opinion, the ECL stock is a bit expensive right now.

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Data: Yahoo Finance

ECL Dividend Yield Chart

ECL Dividend Yield data by YCharts

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Chart: finviz.com

Lowe's Companies Inc. (NYSE:LOW)

Lowe's Companies, Inc., together with its subsidiaries, operates as a home improvement retailer. It offers a range of products for maintenance, repair, remodeling, and home decorating.

Lowe's has a trailing P/E of 23.23 and a forward P/E of 18.76. The PEG ratio is at 1.46, and the price-to-sales ratio is very low at 0.86. The price to free cash flow for the trailing 12 months is at 25.05, and the average annual earnings growth estimates for the next 5 years is quite high at 15.94%. The forward annual dividend yield is at 1.64%, and the payout ratio is only 36.9%. The annual rate of dividend growth over the past five years was very high at 14.8%.

The LOW stock is trading 4.21% above its 20-day simple moving average8.23% above its 50-day simple moving average and 27.65% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

LOW has a total cash per share of $1.16 and it is expected to post a profit of $1.72 a share in the current year and $2.08 in the next year, which should be more than enough to sustain dividend payments of $0.64.

LOW will report its latest quarterly financial results on February 24. LOW is expected to post a profit of $0.23 a share, a 20.7% decline from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

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Holding the LOW stock during the last five years has given a high average annual return of 12.3%, without the dividends the average annual return would be 8.1%. Holding the LOW stock during the last ten years has given an average annual return of 8.4%, and during the last twenty years a very nice average annual return of 17.6%.

The quite cheap valuation metrics, the solid dividend, the long history of steadily increasing dividend, the strong EPS growth prospects, and fact that the stock is in an uptrend are all factors that make LOW stock quite attractive.

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Data: Yahoo Finance

LOW Dividend Yield Chart

LOW Dividend Yield data by YCharts

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Chart: finviz.com

Leggett & Platt, Incorporated (NYSE:LEG)

Leggett & Platt, Incorporated designs and produces various engineered components and products worldwide.

Leggett & Platt has a trailing P/E of 23.98 and a forward P/E of 15.65. The price to free cash flow is at 30.08, and the average annual earnings growth estimates for the next 5 years is at 15%. The forward annual dividend yield is at 3.90%, and the payout ratio is 91.9%. The annual rate of dividend growth over the past five years was at 3.0%.

The LEG stock is trading 2.51% above its 20-day simple moving average, 6.81% above its 50-day simple moving average and 24.15% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

LEG has a total cash per share of $2.53 and it is expected to post a profit of $1.62 a share in the current year and $1.90 in the next year, which should be enough to sustain dividend payments of $1.16.

On February 04, Leggett & Platt reported its results for the fourth quarter and full year of 2012, which beat EPS expectations by $0.01 and missed on revenues.

Highlights

  • 2012 full-year EPS was a record $1.70, including unusual non-cash net tax benefits; at high end of guidance
  • 2012 full-year EPS from Continuing Operations was a record $1.46, excluding net tax benefits
  • 4Q EPS, excluding the net tax benefit, was $.32, at the high end of guidance issued in October
  • Fifth consecutive year that Leggett & Platt stock generated a higher return than the S&P 500 index
  • 2013 EPS guidance is $1.50-1.75, on sales of $3.75-3.95 billion

In the report, David S. Haffner, President and CEO, commented:

It's now been five years since our November 2007 announcement of a critical change in strategic direction and focus for Leggett & Platt. We are quite proud of the results we've been able to deliver to our shareholders, and are confident that our very strong 5-year stock performance stems, at least in part, from our decision to change strategy. Operationally, I'm very satisfied with the notable progress we made during 2012. Though the economy held sales growth to a modest level, we significantly improved EBIT and expanded EBIT margin by 270 basis points. We generated more than enough cash from operations to readily fund dividends and capital expenditures, something we've accomplished for over 20 years.

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Holding the LEG stock during the last five years has given an extremely high average annual return of 18.3%, without the dividends the average annual return would be 9.4%. Holding the LEG stock during the last ten years has given an annual return of 8.9%, and during the last twenty years an average annual return of 9.2%.

In my opinion, the LEG stock is a bit expensive right now.

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Data: Yahoo Finance

LEG Dividend Yield Chart

LEG Dividend Yield data by YCharts

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Chart: finviz.com

The Sherwin-Williams Company (NYSE:SHW)

The Sherwin-Williams Company engages in the development, manufacture, distribution, and sale of paints, coatings, and related products to professional, industrial, commercial, and retail customers primarily in North and South America, the Caribbean region, Europe, and Asia.

Sherwin-Williams has a trailing P/E of 25.23, and a forward P/E of 18.12. The PEG ratio is at 1.75, and the average annual earnings growth estimates for the next 5 years is quite high at 14.60%. The forward annual dividend yield is at 0.95%, and the payout ratio is only 24%. The annual rate of dividend growth over the past five years was at 4.4%.

The SHW stock is trading 0.42% above its 20-day simple moving average, 28% above its 50-day simple moving average and 15.62% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

SHW has a total cash per share of $0.54 and it is expected to post a profit of $7.81 a share in the current year and $9.32 in the next year, which is more than enough to sustain dividend payments of $1.56.

On January 31, Sherwin-Williams reported its results for the fourth quarter and full year of 2012, which missed EPS expectations by $0.03 and beat on revenues.

Highlights

  • Consolidated net sales for the year increased 8.8% to a record $9.53 billion
  • Diluted net income per common share increased to a record $6.49 per share in twelve months 2012 compared to $4.14 per share last year
  • Earnings before interest, taxes, depreciation and amortization increased $244.4 million in the year to a record $1.21 billion
  • Net operating cash increased $152.1 million to a record $887.9 million
  • Anticipates diluted earnings per share for 2013 in the range of $7.45 to $7.55 per share

In the report, Christopher M. Connor, Chairman and Chief Executive Officer, said:

We are pleased to report record highs for multiple financial measures in 2012, including sales, earnings per share, net operating cash and earnings before interest, taxes, depreciation and amortization. All of our operating segments contributed to the record year with increases in sales and operating profit, lead by our Paint Stores Group.

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Holding the SHW stock during the last five years has given an extremely high average annual return of 28.2%, without the dividends the average annual return would be 23.3%. Holding the SHW stock during the last ten years has given a very high average annual return of 22.2%, and during the last twenty years a very nice average annual return of 15.0%.

In my opinion, the SHW stock is a bit expensive right now.

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Data: Yahoo Finance

SHW Dividend Yield Chart

SHW Dividend Yield data by YCharts

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Chart: finviz.com

Conclusion

In my opinion, among the five Dividend Aristocrats that have the highest EPS growth, MHP and LOW are quite attractive, and ECL, LEG and SHW are a bit expensive right now.

Source: 5 Dividend Aristocrats With The Highest EPS Growth; Are They Bargain Stocks Now?