5 Dividend Aristocrats With Highest Short- And Long-Term Revenue Growth Rates

 |  Includes: AFL, CSL, ECL, NNN, PNR, SDY
by: Richard Shaw

By this time most businesses have probably refinanced what they can, deleveraged as much as they can or care to do, and cut or contained labor and other costs as far as they feel is prudent. Now the challenge for continued earnings growth is much more a matter of the top line.

We looked at the short-term and long-term revenue growth of the 84 stocks in the S&P High Yield Dividend Aristocrats index ETF (NYSEARCA:SDY).

Note: This index should not be confused with the S&P 500 Dividend Aristocrats index. The Dividend Aristocrats index is equal weighted and consists of those members of the S&P 500 index that have paid and increased dividends without interruption for at least 25 years. The High Yield Dividend Aristocrats index is weighted by indicated annual yield, and has a limit of 4% weight per holding, and constituents must be members of the S&P 1500, and have paid and increased dividends without interruption for at least 20 years. The S&P 1500 is the sum of the large-cap 500, mid-cap 400 and small-cap 600 indexes.

Here are the five stocks in the High Yield Dividend Aristocrats with the highest 12 month revenue growth, and which also have revenue growth rates above the median for the group for 1-year, 3-years, 5-years, 7-years, Q5 to Q1, Q6 to Q2, Q7 to Q3 and Q8 to Q4.

Ecolab Inc. ECL
Pentair Ltd PNR
National Retail Properties NNN
AFLAC Incorporated AFL
Carlisle Companies, Inc. CSL
Click to enlarge

The maximum, median and minimum percentage revenue growth rates among the group of 84 stocks for the different time periods is as shown in this table image:

The growth rates for the top five is as shown in this table image:

The full spreadsheet of the information above looks like this, and is available at this link to those who join our opt-in email list to receive occasional commentaries.

You might want this file to mine for specific opportunities, or just to better understand what is under the hood for your SDY position.

Click to enlarge

As you can see in this table, top revenue growth is not sufficient to overcome other issues that may reduce the appeal of a stock.

Click to enlarge

ThomsonReuters StarMine gives PNR an outright thumbs down, with a 0.9 on their 10 point scale for year ahead performance, and they really only feel good about ECL and CSL, which have scores above their 7 bullish rating.

Standard & Poor's does not rate NNN, but gives the other 4 good fair value ratings on their 5 point scale.

Wright Investor Services gives them all good financial strength ratings. On a 5-6 year basis, they find the level of profitability and profits stability to be only fair for NNN, and limited for PNR on their A, B, C, D, L scale. In terms of growth of net and cash earnings, dividends, retained earnings, assets and sales over a 5-6 year period, they give PNR and NNN each a 0 on a 20 point scale.

It looks like you have to compromise on growth criteria to get good selection of companies that also have other desirable attributes. You can have anything you want, but not everything you want.

That is one reason that index funds sometimes make good sense - the beauty spots in some of the holdings compensate for the blemishes in some others, creating a good overall complexion. Issue selection risk is higher buying individual stocks, and the loss of ability to outperform is a potential opportunity cost risk of buying an index.

Five year charts of price, earnings and dividends for the top five from CorporateInformation are as follows (note that net earnings for REITs are not a good metric due to their tax sheltered income features):

Disclosure: QVM has positions in SDY as of the creation date of this article (April 12, 2013). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, but are compensated retroactively by Seeking Alpha based on readership of this specific article.

General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.