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Setting The Table

As you might know, I've developed a very simple process for prioritizing the "Best of the Best" dividend stocks using David Fish's Dividend Champion Spreadsheet. (Thank you, David!)

First, in David's words:

"Champions mean 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. 'CCC' refers to the universe of Champions, Contenders and Challengers."

I'm going to focus on true dividend champions with 25-plus year streaks. You can definitely use this simple process with all "CCC" stocks. However, to keep the focus narrow and targeted, we're only going to look at Champions today.

Second, for reference, I encourage you to review the Super Dividend Champions (October 2013) article. That provides a foundation of the process and it will make it easier for you to compare last month to this month. I'll also be talking about October vs. November in a short while.

Choosing the Data

I'm using these 9 columns of data from David Fish's spreadsheet and the 10th column ("S") is an equal-weighted sum of the data. I'm assuming that no column is more important than any other column.

I'm also providing the shorthand for the column labels. For example, "C" is for Chowder, "T" is for Tweed, and so on. This will make cross referencing easier for you.

  • Chowder ("C")
  • Tweed ("T")
  • Div Yield ("Y")
  • EPS % Payout ("E%")
  • Past 5 Years Div Growth ("G")
  • A/D Ratio ("AD")
  • Payback Years ("PB")
  • Price Above Low ("L")
  • Confidence Factor ("CF")
  • Summarized Data ("S")

Below you'll see the results and I'm going to provide some additional color on the results.

Let's take a look:

(click to enlarge)Nov 2013 Super Champs

Limitations and Caveats

First, look at the "S" column on the far right. That's the rank ordered summarized data. The "best" are at the top and the higher the number the stronger the company is, based on all the factors outlined above.

True Value of This Process

As I mentioned in my previous articles:

  • We're not looking for cigar butts.
  • We're not reaching for yield.
  • We're not trying to time the market.
  • We're not trying to find the "best" company.
  • We're not even trying to find the absolute best deal.

Instead, we're trying to narrow our focus down to the best of the best companies that have paid and grown dividends for 25 years or more, Dividend Champions.

We're trying to compare them to each other. We're trying to figure out who deserves attention and who does not. This is a simple way to rationally sort Dividend Contenders at the start of November 2013. In short, this is a focusing tool.

October 2013 vs. November 2013

For reference purposes I compared Top 20 Super Dividend Champions in October 2013 to Top 20 November 2013. If you look at the NOVEMBER 2013 data you'll see Company Names that are White, Green or Red.

(click to enlarge)

KEY:

  • White = No change in position from Oct 2013 to Nov 2013
  • Green = Improvement from Oct 2013 to Nov 2013
  • Red = Decline from Oct 2013 to Nov 2013

Please note that this is not an indication of business quality. I cannot stress that enough. Instead, it's almost entirely caused by relative price changes and the subsequent dividend yield changes.

Also, virtually all Super Dividend Champions have increased in price in the last 60 days. So again, you're getting a view of relative strength, not a view of absolute strength, other than the fact that Super Dividend Champions are companies with an incredible dividend track record of more than 25 years.

Next Steps?

Do not be deceived by high rankings alone. Although this process is rational, the output you see above, and the month-to-month comparisons, are not the end game. To be blunt about it, these Super Dividend Champions may be undervalued, fairly valued or overvalued. You've got to look under the covers.

If you're trying to narrow your focus even more, Chuck Carnevale's F.A.S.T. Graphs can help you dig deeper. For example, I see Hormel Foods (NYSE:HRL) being overvalued. And, I see Aflac (NYSE:AFL) as potentially being undervalued.

(click to enlarge)HRL

And...

(click to enlarge)AFL

This is just the start. Please be sure to perform your own due diligence. Nothing can replace that.

Disclosure: I am long AFL. 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.

Source: Super Dividend Champions: November 2013 Edition