Scouting For New Dividend Ideas

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Includes: AWR, CB, CBSH, CINF, GPC, JNJ, KO, MO, NWN, TGT
by: Income Surfer

Every few months I like to break out my stock screeners in search of great dividend paying stocks. Dividend investing is largely about being patient and methodical. Paying too much, even for a good company, can make for a bad investment. That's where the patience comes in…… we have to buy at the right price. If you need a few strategies for being patient in your own life, check out this recent article I wrote on the subject.

Sometimes, I scour the internet in search of new dividend lists and ideas. This past week I came across a new resource called Dividend Ladder. It's a membership site that offers and assortment of screeners, dividend lists, and tools. I was impressed enough with the site and had a few new dividend ideas to pursue by the time I logged off. Below is a list of the "safest" dividend paying companies that Dividend Ladder generated based on the following criteria:

  1. A PE (price to earnings) multiple of less than 20
  2. At least 40 years of annual dividend increases
  3. A dividend payout ratio below 0.85

The List

1. American States Water Company (NYSE:AWR)- American States Water Company is a water utility company. It has no long term debt, a 1.39 price to book ratio, and a return-on-equity rate of 9.85%. The company also pays a 2.7% dividend and has a 47% payout ratio. Over the past 5 years, the company has recorded a dividend growth rate of 8.73% annually. Think of AWR's shares as a 10 Year U.S. government bond, with some upside, and strong cash flow from operations.

2. Northwest Natural Gas (NYSE:NWN)- Northwest Natural Gas Company is a Portland, Oregon based company which distributes natural gas in the pacific northwest. It pays a 4.3% dividend with an 82% dividend payout ratio. Over the past 5 years, the company has recorded a dividend growth rate of 4.45% annually. The company has $930 million in total debt, $9.47 million in cash on hand, and a current ratio of 0.76. The company also has a price to book ratio of 1.50, operating margins of 18.82% and a return-on-equity rate of 8.15%.

3. Genuine Parts (NYSE:GPC)- General Parts Company is an Atlanta, Georgia based manufacturer of automotive replacement parts. It pays a 2.6% dividend with a payout ratio of 49%. Over the past 5 years, the company has recorded a dividend growth rate of 6.28% annually. The company has $765 million in total debt, $197 million in cash on hand, and a current ratio of 1.64. The company also has a price to book ratio of 3.99, operating margins of 7.59% and a return-on-equity rate of 21.52%.

4. Cincinnati Financial (NASDAQ:CINF)-Cincinnati Financial Corporation is a Fairfield, Ohio based property and casualty insurance company. It pays a 3.8% dividend with a payout ratio of 53%. Over the past 5 years, the company has recorded a dividend growth rate of 2.67% annually. The company has $939 million in total debt, $433 million in cash on hand, and a current ratio of 1.23. The company also has a price to book ratio of 1.25, operating margins of 16.95% and a return-on-equity rate of 8.97%.

5. Coca-Cola (NYSE:KO)-The Coca-Cola Company is an Atlanta, GA based water, juice, and carbonated beverage company. It pays a 3.2% dividend with a payout ratio of 59%. Over the past 5 years, the company has recorded a dividend growth rate of 8.45% annually. The company has $37.1 billion in total debt, $20.27 billion in cash on hand, and a current ratio of 1.13. The company also has a price to book ratio of 5.05, operating margins of 23.67% and a return-on-equity rate of 25.90%.

6. Johnson & Johnson (NYSE:JNJ)-Johnson & Johnson is a New Brunswick, New Jersey based consumer staples company. It sells everything from medications, to medical devices and toiletries. It pays a 2.9% dividend with a payout ratio of 54%. Over the past 5 years, the company has recorded a dividend growth rate of 7.61% annually. The company has $18.2 billion in total debt, $29.2 billion in cash on hand, and a current ratio of 2.20. The company also has a price to book ratio of 3.48, operating margins of 26.58% and a return-on-equity rate of 19.92%.

7. Chubb Corporation (NYSE:CB)-The Chubb Corporation is a Warren, New Jersey based property and casualty insurance company. It pays a 2.3% dividend with a payout ratio of 24%. Over the past 5 years, the company has recorded a dividend growth rate of 7.17% annually. The company has $3.30 billion in total debt, $1.93 billion in cash on hand. The company also has a price to book ratio of 1.40, operating margins of 21.02% and a return-on-equity rate of 14.91%.

8. Target Corporation (NYSE:TGT)-Target Corporation is a Minneapolis, Minnesota based big box retailer. It pays a 2.8% dividend with a payout ratio of 51%. Over the past 5 years, the company has recorded a dividend growth rate of 20.48% annually. The company has $13.78 billion in total debt, $695 million in cash on hand, and a current ratio of 0.91. The company also has a price to book ratio of 2.37, operating margins of 5.83% and a return-on-equity rate of 12.02%.

9. Altria Group (NYSE:MO)-Altria Group is a Richmond, Virginia based manufacturer of tobacco products. It pays a 5.3% dividend with a payout ratio of 81%. Over the past 5 years, the company has recorded a dividend growth rate of 1.84% annually. The company has $14.52 billion in total debt, $3.18 billion in cash on hand, and a current ratio of 1.22. The company also has a price to book ratio of 17.31, operating margins of 47.33% and a return-on-equity rate of 123.26%.

10. Commerce Bancshares (NASDAQ:CBSH)-Commerce Bancshares is a Kansas City, Missouri based bank holding company. It pays a 2.0% dividend with a payout ratio of 32%. Over the past 5 years, the company has recorded a dividend growth rate of 4.28% annually. The company has $1.47 billion in total debt, $2.40 billion in cash on hand. The company also has a price to book ratio of 1.92, operating margins of 38.95% and a return-on-equity rate of 11.91%.

My Thoughts

Of the companies above, American States Water Company, The Coca-Cola Company, Johnson & Johnson, Chubb Corporation, and Target look the most appealing. Coca-Cola and Johnson & Johnson are already sizable portions of my portfolio, and they have rewarded me (as well as other shareholders) over the years.

I think I would be a buyer of Target Corporation stock, if it falls much further. In fact, a month ago I set out to buy Target's stock, only to have the price per share rise before I was ready to purchase. The reasons I wanted to buy Target are documented in the linked Seeking Alpha article. It looks like I may get another chance to purchase shares of Target Corporation. Chubb Corporation and American States Water Company warrant further research before I invest, but each looks like a well run company that provides a necessary service for its customers. I hope this brief list of dividend paying stocks helped generate some ideas for your own portfolio.

Disclosure: I own shares of KO and JNJ. This article is for informational purposes only and should not be considered a recommendation for anyone to buy, sell, or hold any equities. I am not a financial professional. The information above is provided by Yahoo Finance, Morningstar.com, and DividendLadder.com.