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Summary

  • 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:

  1. increased their dividend per share every for at least the last 25 consecutive years;
  2. float-adjusted market capitalization of at least $3 billion; and
  3. 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:

  1. price-to-book;
  2. price-to-earnings;
  3. price-to-sales;
  4. dividend yield; and
  5. 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

Company

Symbol

3M Company

(NYSE:MMM)

Abbott Laboratories

(NYSE:ABT)

AbbVie Inc.

(NYSE:ABBV)

AFLAC Inc.

(NYSE:AFL)

Air Products & Chemicals Inc.

(NYSE:APD)

Archer Daniels Midland Company

(NYSE:ADM)

AT&T, Inc.

(NYSE:T)

Automatic Data Processing, Inc.

(NASDAQ:ADP)

Becton, Dickinson and Company

(NYSE:BDX)

Bemis Company, Inc.

(NYSE:BMS)

Brown-Forman Corporation

(NYSE:BF.B)

Cardinal Health, Inc.

(NYSE:CAH)

Chevron Corporation

(NYSE:CVX)

Cincinnati Financial Corp.

(NASDAQ:CINF)

Cintas Corporation

(NASDAQ:CTAS)

Colgate-Palmolive Co.

(NYSE:CL)

Consolidated Edison, Inc.

(NYSE:ED)

C.R. Bard Inc.

(NYSE:BCR)

Dover Corporation

(NYSE:DOV)

Ecolab Inc.

(NYSE:ECL)

Emerson Electric Co.

(NYSE:EMR)

Exxon Mobil Corporation

(NYSE:XOM)

Family Dollar Stores Inc.

(NYSE:FDO)

Franklin Resources Inc.

(NYSE:BEN)

Genuine Parts Company

(NYSE:GPC)

HCP, Inc.

(NYSE:HCP)

Hormel Foods Corporation

(NYSE:HRL)

Illinois Tool Works Inc.

(NYSE:ITW)

Johnson & Johnson

(NYSE:JNJ)

Kimberly-Clark Corporation

(NYSE:KMB)

Leggett & Platt, Incorporated

(NYSE:LEG)

Lowe's Companies Inc.

(NYSE:LOW)

McCormick & Company, Incorporated

(NYSE:MKC)

McDonald's Corp.

(NYSE:MCD)

McGraw Hill Financial, Inc.

(NYSE:MHFI)

Medtronic, Inc.

(NYSE:MDT)

Nucor Corporation

(NYSE:NUE)

Pentair Ltd.

(NYSE:PNR)

PepsiCo, Inc.

(NYSE:PEP)

PPG Industries Inc.

(NYSE:PPG)

Sigma-Aldrich Corporation

(NASDAQ:SIAL)

Stanley Black & Decker, Inc.

(NYSE:SWK)

Sysco Corporation

(NYSE:SYY)

T. Rowe Price Group, Inc.

(NASDAQ:TROW)

Target Corp.

(NYSE:TGT)

The Chubb Corporation

(NYSE:CB)

The Clorox Company

(NYSE:CLX)

The Coca-Cola Company

(NYSE:KO)

The Procter & Gamble Company

(NYSE:PG)

The Sherwin-Williams Company

(NYSE:SHW)

V.F. Corporation

(NYSE:VFC)

W.W. Grainger, Inc.

(NYSE:GWW)

Wal-Mart Stores Inc.

(NYSE:WMT)

Walgreen Co.

(NYSE:WAG)

METHODOLOGY

The Aristocrats were compared against each other using the following five metrics:

  1. price-to-book;
  2. price-to-earnings;
  3. price-to-sales;
  4. dividend yield; and
  5. 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

Company

Price-To-Book

CINF

1.3

ED

1.4

CB

1.4

ADM

1.5

CVX

1.6

HCP

1.7

SWK

1.9

AFL

2

T

2.1

NUE

2.2

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

Company

Price-To-Earnings

AFL

9.3

CB

10

T

10.3

CVX

11.2

PPG

13.5

XOM

13.6

BEN

15.4

MHFI

15.6

DOV

15.6

ED

15.7

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

Company

Price-To-Sales

CAH

0.2

ADM

0.3

WMT

0.5

TGT

0.5

SYY

0.5

FDO

0.6

BMS

0.8

WAG

0.9

GPC

0.9

NUE

0.9

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

Company

Dividend Yield

HCP

5.4

T

5.1

ED

4.5

LEG

3.6

CINF

3.6

ABBV

3.5

MCD

3.2

CVX

3.2

SYY

3.2

PG

3.1

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

Company

Percent Above 52-Week Low

FDO

3.2

MCD

7.5

ED

8.5

WMT

9.1

PG

9.2

T

10

BMS

10.2

KO

10.6

CB

10.7

PEP

10.9

CONCLUSION

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:

  1. 2 companies with 4 points;
  2. 2 companies with 3 points;
  3. 6 companies with 2 points;
  4. 9 companies with 1 point; and
  5. 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:

  1. 4 points - AT&T, Inc.;
  2. 4 points - Consolidated Edison, Inc.;
  3. 3 points - Chevron Corporation; and
  4. 3 points - The Chubb Corporation.
Source: 4 Dividend Aristocrats You Should Consider Buying