Dividend Challengers Smackdown XXXVII

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 |  Includes: ACN, AMP, AZN, BAX, CR, INTC, MOLX, NOC, RAI, RTN, TCAP
by: David Fish

Dividend Challengers Smackdown XXXVII

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) by low Debt/Equity and Price/Earnings Ratios and, last month, by high Estimated 5-year Earnings-Per-Share Growth and 5-year Dividend Growth Rate.

(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 three of the metrics added at the end of 2012. 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 Debt/Equity (column AJ), low to high. Eliminating companies that had a number above 1.00 (more debt than equity) cut the list to 86 companies.

Step 2: Sort the companies by their Trailing Twelve Months' ROE, or Return On Equity (column AC), high to low, and eliminate any company with an ROE below 10%. That cut the list to 58 companies.

Step 3: Sort the remaining companies by their Chowder Rule number (column BW), high to low, and eliminate any company with a result below 12. That cut the list to 35 companies. (Note that the Chowder Rule calls for the sum of the Yield and the 5-year Dividend Growth Rate to exceed 12 for new purchases, whereas numbers between 8 and 12 are acceptable for Holding existing positions. Named after SA user Chowder, this rule is meant to be used in conjunction with additional research, such as credit ratings and financial strength.)

Step 4: 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. That cut the list to 24 companies.

Step 5: Sort the companies by their Yield (column I), high to low, and eliminate any company with a yield of less than 2%. That trimmed the list to 11 companies, which appear below.

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

Company

Ticker

No.

3/28

Div.

TTM

TTM

Debt/

Chowder

Name

Symbol

Yrs

Price

Yield

P/E

ROE

Equity

Rule

Accenture plc

(NYSE:ACN)

8

75.97

2.13

19.33

63.10

0.00

30.9

Ameriprise Financial Inc.

(NYSE:AMP)

8

73.65

2.44

15.84

11.40

0.87

23.1

Astrazeneca plc

(NYSE:AZN)

9

49.98

5.70

10.04

26.81

0.43

15.9

Baxter International Inc.

(NYSE:BAX)

6

72.64

2.48

17.38

34.40

0.85

18.9

Crane Company

(NYSE:CR)

8

55.86

2.01

16.67

22.56

0.44

12.4

Intel Corp.

(NASDAQ:INTC)

9

21.83

4.12

10.25

22.66

0.26

18.2

Molex Inc.

(NASDAQ:MOLX)

9

29.28

3.01

18.77

11.30

0.14

23.0

Northrop Grumman

(NYSE:NOC)

9

70.15

3.14

8.98

19.93

0.41

13.1

Raytheon Company

(NYSE:RTN)

9

58.79

3.74

10.41

23.31

0.59

17.7

Reynolds American Inc.

(NYSE:RAI)

8

44.49

5.30

19.86

22.11

0.97

13.1

Triangle Capital Corp.

(NYSE:TCAP)

7

27.99

7.72

12.50

15.98

0.87

23.3

Click to enlarge

Conclusion

Among the finalists are companies in a wide variety of industries and sectors. Consider any tax implications for foreign companies 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 a company that appears to be undervalued, as indicated by its price line being in the green-shaded earnings area, just below. Note that the INTC, NOC, and RTN charts also were attractive, but I have used them more recently.

Click to enlarge

Disclosure: I am long INTC, 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.