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Arie Goren, Portfolio123 (474 clicks)
Long only, value, research analyst, dividend investing
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A good time to start a long-term investment in a blue-chip company, which has a long history of steadily increasing dividend payment, is when due to temporary weakness its dividend yield is historically high.

I have searched for this kind of stock among the stocks included in the S&P 500 Dividend Aristocrats index. The Dividend Aristocrats are S&P 500 constituents that have increased their dividend payouts for 25 consecutive years.

I have elaborated a screening method, which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks to comply with all following demands:

1. The stock is included in the S&P 500 Dividend Aristocrats index. Standard & Poor's explanation:

The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.

2. Dividend yield is greater than 2.0%.

3. The forward dividend yield is greater than the five-year average dividend yield.

4. The payout ratio is less than 50%.

5. The annual rate of dividend growth over the past five years is greater than 10%.

6. The annual rate of dividend growth over the past 10 years is greater than 9%.

7. Forward P/E is less than 13.

8. Average annual earnings growth estimates for the next five years is greater or equal 3%.

After running this screen on April 08, 2013, before the market open, I discovered the following four stocks:

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XOM Dividend Chart

XOM Dividend data by YCharts

XOM Dividend Yield Chart

XOM Dividend Yield data by YCharts

Exxon Mobil Corporation (XOM)

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products.

Exxon Mobil has a very low debt (total debt to equity is only 0.07), and it has a very low trailing P/E of 9.18 and a very low forward P/E of 10.55. The forward annual dividend yield is at 2.56%, and the five-year average dividend yield was at 2.30%. The payout ratio is only 22%. The annual rate of dividend growth over the past five years was quite high at 10.2%, and over the past ten years was also quite high at 9.5%.

Exxon Mobil will report its latest quarterly financial results on April 24. XOM is expected to post a profit of $2.01 a share, a 0.5% 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 compelling valuation metrics, the solid dividend, the fact that the company consistently has raised dividend payments, and the fact that the future yield is greater than the five-year average yield are all factors that make XOM stock a buying opportunity.

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Chart: finviz.com

Medtronic, Inc. (MDT)

Medtronic, Inc. manufactures and sells device-based medical therapies worldwide.

Medtronic, Inc. has quite a low debt (total debt to equity is 0.64) and it has a very low trailing P/E of 13.69 and even a lower forward P/E of 11.99. The average annual earnings growth estimates for the next five years is at 6.73%. The forward annual dividend yield is at 2.25%, and the five-year average dividend yield was at 2.00%. The payout ratio is only 31%. The annual rate of dividend growth over the past five years was very high at 15.8%, and over the past 10 years was also very high at 15.2%.

The MDT stock is trading 0.83% above its 20-day simple moving average, 0.98% above its 50-day simple moving average, and 10.19% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Medtronic will report its latest quarterly financial results on May 20. MDT is expected to post a profit of $1.03 a share, a 4.0% 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 cheap valuation metrics, the solid dividend, the fact that the company consistently has raised dividend payments, the fact that the future yield is greater than the five-year average yield, and the fact that the MDT stock is in an uptrend are all factors that make MDT stock a buying opportunity.

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Chart: finviz.com

Target Corp. (TGT)

Target Corporation operates general merchandise stores in the United States.

Target has a trailing P/E of 15.23 and a very low forward P/E of 12.34. The PEG ratio is at 1.28, and the price-to-sales ratio is very low at 0.60. The average annual earnings growth estimates for the next five years is quite high at 11.87%. The forward annual dividend yield is at 2.09%, and the five-year average dividend yield was at 2.00%. The payout ratio is only 29%. The annual rate of dividend growth over the past five years was very high at 20.8%, and over the past 10 years was also very high at 19.6%.

The TGT stock is trading 1.61% above its 20-day simple moving average, 6.57% above its 50-day simple moving average, and 10.96% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Target Corp. will report its latest quarterly financial results on May 22. TGT is expected to post a profit of $0.98 a share, a 6% 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.

The cheap valuation metrics, the solid dividend, the fact that the company consistently has raised dividend payments, the fact that the future yield is greater than the five-year average yield, and the fact that the TGT the stock is in an uptrend are all factors that make TGT stock a buying opportunity.

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Chart: finviz.com

Walgreen Co. (WAG)

Walgreen Co., together with its subsidiaries, operates a network of drugstores in the United States.

Walgreen has a low debt (total debt to equity is only 0.35), and it has a trailing P/E of 20.90 and a very low forward P/E of 12.74. The PEG ratio is at 1.57, and the price-to-sales ratio is very low at 0.63. The average annual earnings growth estimates for the next five years is quite high at 13.40%. The forward annual dividend yield is at 2.34%, and the five-year average dividend yield was at 2.20%. The payout ratio is at 47%. The annual rate of dividend growth over the past five years was very high at 23.7%, and over the past ten years was also very high at 21.9%.

The WAG stock is trading 5.34% above its 20-day simple moving average, 11.14% above its 50-day simple moving average, and 29.33% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Walgreen will report its latest quarterly financial results on May 25. WAG is expected to post a profit of $0.92 a share, a 48% 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 cheap valuation metrics, the solid dividend, the fact that the company consistently has raised dividend payments, the fact that the future yield is greater than the five-year average yield, and the fact that the WAG the stock is in an uptrend are all factors that make WAG stock a buying opportunity.

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Chart: finviz.com

Source: 4 Dividend Aristocrat Stocks To Buy Now