There are currently 48 other Dividend Aristocrats you could be making the mistake of buying instead.
These 4 Aristocrats have a dividend yield 58% higher than the average Aristocrat.
These 4 Aristocrats' price-to-book value is 1/4 that of the average Aristocrat.
Dividend Aristocrats are a select group of companies from the S&P 500 that have:
- increased their dividend per share every for at least the last 25 consecutive years;
- float-adjusted market capitalization of at least $3 billion; and
- average daily value traded of at least $5 million for the three months prior to rebalance the list of Aristocrats.
Companies included in the Aristocrats come from a wide range of industries and have wildly varying valuations. This article identifies the 4 Dividend Aristocrats which appeared most often among the best ten of all Aristocrats when looking individually at:
- dividend yield; and
- percent above 52-week low.
The complete list of Dividend Aristocrats is available below in Table 1:
Table 1. Dividend Aristocrats As Of March 2014
Air Products & Chemicals Inc.
Archer Daniels Midland Company
Automatic Data Processing, Inc.
Becton, Dickinson and Company
Bemis Company, Inc.
Cardinal Health, Inc.
Cincinnati Financial Corp.
Consolidated Edison, Inc.
C.R. Bard Inc.
Emerson Electric Co.
Exxon Mobil Corporation
Family Dollar Stores Inc.
Franklin Resources Inc.
Genuine Parts Company
Hormel Foods Corporation
Illinois Tool Works Inc.
Johnson & Johnson
Leggett & Platt, Incorporated
Lowe's Companies Inc.
McCormick & Company, Incorporated
McGraw Hill Financial, Inc.
PPG Industries Inc.
Stanley Black & Decker, Inc.
T. Rowe Price Group, Inc.
The Chubb Corporation
The Clorox Company
The Coca-Cola Company
The Procter & Gamble Company
The Sherwin-Williams Company
W.W. Grainger, Inc.
Wal-Mart Stores Inc.
The Aristocrats were compared against each other using the following five metrics:
- dividend yield; and
- percent above 52-week low.
For each metric, I sorted the companies' respective metric value from least to greatest, except for dividend yield, which was greatest to least. Once the companies' values were sorted, I assigned a point to each of the top ten companies for each metric, and subtracted a point for each of the bottom ten companies. This means a maximum of 5 total points and a minimum of -5 total points was possible. All data was obtained from Yahoo Finance after the close of trading on Wednesday, April 23, 2014.
METRIC 1. PRICE-TO-BOOK
Price-to-book values were sorted from least to greatest. The average price-to-book value of all Aristocrats is approximately 6.1, while the average price-to-book value of the top ten Aristocrats is approximately 1.7. This means the companies in Table 2 are, on average, approximately 75% cheaper by price-to-book than the average Aristocrat.
Table 2. Top Ten Aristocrats By Price-To-Book
METRIC 2. PRICE-TO-EARNINGS
Price-to-earnings values were sorted from least to greatest. The average price-to-earnings value of all Aristocrats is approximately 21.7*, while the average price-to-earnings value of the top ten Aristocrats is approximately 13. This means the average Aristocrat is nearly 67% more expensive by price-to-earnings than the top ten companies in Table 3.
* The actual average for all Aristocrats is approximately 54.1, because WMT's price-to-earnings ratio is approximately 1,774, so WMT was excluded from this specific metric's analysis, and the adjusted average became 21.7.
Table 3. Top Ten Aristocrats By Price-To-Earnings
METRIC 3. PRICE-TO-SALES
Price-to-sales values were sorted from least to greatest. The average price-to-sales value of all Aristocrats is approximately 2.3, while the average price-to-sales value of the top ten Aristocrats is approximately 0.6. This means the companies in Table 4 are, on average, approximately one-fourth as expensive by price-to-sales as the average Aristocrat.
Table 4. Top Ten Aristocrats By Price-To-Sales
METRIC 4. DIVIDEND YIELD
Dividend yield values were sorted from greatest to least. The average dividend yield of all Aristocrats is approximately 2.4%, while the average dividend yield of the top ten Aristocrats is approximately 3.8%. This means the companies in Table 5 yield, on average, approximately 58% more than the average Aristocrat.
Table 5. Top Ten Aristocrats By Dividend Yield
METRIC 5. PERCENT ABOVE 52-WEEK LOW
Percent above 52-week low values were sorted from least to greatest. The average percent above 52-week low value of all Aristocrats is approximately 23.7%, while the average percent above 52-week low value of the top ten Aristocrats is approximately 9%. I like to purchase high-quality securities like those considered to be a Dividend Aristocrat when they are trading near their relative lows, because I consider this akin to buying groceries when they are on sale and not when their price has been marked up!
Table 6. Top Ten Aristocrats By Percent Above 52-Week Low
Percent Above 52-Week Low
Only 19 of the 54 Dividend Aristocrats managed to survive this analysis with at least one total cumulative point. The complete breakdown of points scored is as follows:
- 2 companies with 4 points;
- 2 companies with 3 points;
- 6 companies with 2 points;
- 9 companies with 1 point; and
- 35 companies with no or negative points.
While I do not rely entirely on this point-based system to make my investment decisions, I have been well served by using it as a starting point for further research. I will be looking further into the companies that scored 4 and 3 points, which were:
- 4 points - AT&T, Inc.;
- 4 points - Consolidated Edison, Inc.;
- 3 points - Chevron Corporation; and
- 3 points - The Chubb Corporation.
Disclosure: I am long ADP, AFL, APD, BDX, CINF, JNJ, KO, LEG, MCD, T, TGT, WAG. 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.