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Dividend Challengers Smackdown XXXVI

In the most recent installments of the Smackdown series, I screened the Dividend Challengers (which can be found here: http://dripinvesting.org/Tools/Tools.asp) 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 and, last month, by low Debt/Equity and Price/Earnings ratios.

(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, with the market pushing new highs, I decided to focus on earnings, the source of both dividend growth and price appreciation. 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 Estimated 5-year Earnings-Per-Share Growth (column AF), high to low. Eliminating companies that are expected to have projections of less than 8% (or had no estimate) cut the list to 89 companies.

Step 2: Sort the companies by their 5-year Dividend Growth Rate (column AN), high to low, and eliminate any company with a DGR below 8%. (My reasoning was that the DGR was a reflection of earnings during the previous five years.) That cut the list to 60 companies.

Step 3: Sort the companies by their Trailing Twelve Months' Price/Earnings ratio (column V), low to high, and eliminate any company with a P/E above 20, so as not to pay too high a premium for the most recent earnings. That cut the list to 38 companies.

Step 4: Sort the remaining companies by their Yield (column I), high to low, and eliminate any company with a yield below 2.5%. That cut the list to 11 companies, which appear below.

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

Company

Ticker

No.

2/28

Div.

TTM

Est 5-yr

DGR

Name

Symbol

Yrs

Price

Yield

P/E

Growth

5-yr

Alliance Holdings GP

(AHGP)

8

51.94

5.70

15.84

14.0

21.5

Ameriprise Financial

(AMP)

8

68.63

2.62

14.76

13.4

20.6

Baxter International Inc.

(BAX)

6

67.60

2.66

16.13

8.8

16.4

BOK Financial Corp.

(BOKF)

8

59.43

2.56

11.56

8.8

14.4

Darden Restaurants

(DRI)

8

46.27

4.32

13.18

10.4

25.8

Intel Corp.

(INTC)

9

20.88

4.31

9.80

11.8

14.1

Molex Inc.

(MOLX)

9

27.74

3.17

17.78

12.5

20.0

Rogers Commun.

(RCI)

8

47.49

3.34

14.61

9.7

38.2

Safeway Inc.

(SWY)

8

23.86

2.93

12.62

11.6

20.3

Textainer Group Hold.

(TGH)

7

40.44

4.45

10.21

10.3

52.1

Triangle Capital Corp.

(TCAP)

7

30.20

7.15

13.60

15.0

15.6

Conclusion

The screen resulted in a wide assortment of companies, each with its own peculiarities. Be sure to consider any tax implications for foreign companies, BDCs (Business Development Corporations), or MLPs (Master Limited Partnerships). 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 Challengers Smackdown XXXVI