A complete list of Dividend Aristocrats as of March 31, 2014 is available in Table 1 of the 4 Dividend Aristocrats You Should Consider Buying article I wrote in April 2014.
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.
However, these stringent requirements to be considered an Aristocrat do not mean every Aristocrat is a "buy" at all times. This article identifies 5 Dividend Aristocrats which appeared most often among the worst ten of all Aristocrats when looking individually at:
- price-to-book;
- price-to-earnings;
- price-to-sales;
- dividend yield; and
- percent above 52-week low.
METHODOLOGY
The Aristocrats were compared against each other using the five metrics listed in bold above. Each company was initially assigned a point value of 0. 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 subtracted a point to each of the bottom ten companies for each metric. This means a maximum of negative 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 median price-to-book of all Aristocrats is approximately 3.8, while the median price-to-book of the bottom ten Aristocrats is approximately 10.7. This means the companies in Table 1 are on average nearly three times more expensive by price-to-book than the average Aristocrat. Each of the companies in Table 1 received a negative point.
Table 1. Bottom Ten Aristocrats By Price-To-Book
Company |
Price to book |
PEP |
5.7 |
ADP |
5.9 |
MCD |
6.1 |
KMB |
8.5 |
BF-B |
10 |
SHW |
11.4 |
MHFI |
16 |
ABBV |
17.7 |
CL |
26.5 |
CLX |
74.1 |
Median |
10.7 |
METRIC 2. PRICE-TO-EARNINGS
Price-to-earnings values were sorted from least to greatest. The median price-to-earnings of all Aristocrats is approximately 21.5, while the median price-to-earnings of the bottom ten Aristocrats is approximately 29.1. While not wildly more expensive by price-to-earnings, all of the bottom ten companies were more expensive than the overall median and WMT's P/E ratio was a whopping 1,773.6! Each of the companies in Table 2 received a negative point.
Table 2. Bottom Ten Aristocrats By Price-To-Earnings
Company |
Price to earnings |
ADP |
26.1 |
SWK |
26.7 |
SHW |
27.6 |
CL |
27.7 |
PNR |
28.7 |
BF-B |
29.5 |
ECL |
33.8 |
NUE |
34.6 |
CAH |
63.3 |
WMT |
1,773.6 |
Median |
29.1 |
METRIC 3. PRICE-TO-SALES
Price-to-sales values were sorted from least to greatest. The median price-to-sales of all Aristocrats is approximately 2, while the median price-to-sales of the bottom ten Aristocrats is approximately 4.2. This means the companies in Table 3 are on average approximately twice as expensive by price-to-sales than the average Aristocrat. Each of the companies in Table 3 received a negative point.
Table 3. Bottom Ten Aristocrats By Price-To-Sales
Company |
Price to sales |
BCR |
3.6 |
KO |
3.9 |
JNJ |
3.9 |
BEN |
4.2 |
ABBV |
4.2 |
SIAL |
4.2 |
MHFI |
4.3 |
TROW |
6.1 |
BF-B |
6.4 |
HCP |
8.9 |
Median |
4.2 |
METRIC 4. DIVIDEND YIELD
Dividend yield values were sorted from greatest to least. The median dividend yield of all Aristocrats is approximately 2.3%, while the median dividend yield of the bottom ten Aristocrats is approximately 1.2%. This means the companies in Table 4 yield on average approximately half that of the average Aristocrat. Each of the companies in Table 4 received a negative point.
Table 4. Bottom Ten Aristocrats By Dividend Yield
Company |
Dividend yield |
GWW |
1.5 |
LOW |
1.5 |
PPG |
1.3 |
CTAS |
1.3 |
PNR |
1.2 |
SHW |
1.1 |
ECL |
1 |
SIAL |
1 |
BEN |
0.9 |
BCR |
0.6 |
Median |
1.2 |
METRIC 5. PERCENT ABOVE 52-WEEK LOW
Percent above 52-week low values were sorted from least to greatest. The median percent above 52-week low of all Aristocrats is approximately 20.6%, while the median percent above 52-week low of the bottom ten Aristocrats is approximately 43.5%. This results in just about every single one of these bottom ten companies trading just below their 52-week high. I prefer to purchase fundamentally-strong Aristocratic companies when they are nearer their 52-week lows. Each of the companies in Table 5 received a negative point.
Table 5. Bottom Ten Aristocrats By Percent Above 52-Week Low
Company |
Percent Above 52 Week Low |
BCR |
39.5 |
ITW |
39.6 |
ADM |
40.2 |
APD |
40.2 |
VFC |
41.4 |
PNR |
45.6 |
MHFI |
50.5 |
DOV |
53.1 |
WAG |
55.6 |
CAH |
58.7 |
Median |
43.5 |
CONCLUSION
Only 21 of the 54 Dividend Aristocrats managed to survive this analysis without belonging to the bottom ten of any metric. Thankfully no Aristocrat appeared in the bottom ten of every metric. The complete breakdown of points lost is as follows:
- 21 companies with 0 points;
- 21 companies with -1 point;
- 7 companies with -2 points; and
- 5 companies with -3 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 an initial gauge by which to judge prospective investments. Based on the results of my research I cannot recommend purchasing the following five companies at this time as they each ended the analysis with negative three points:
- -3 points - CR Bard Inc. (NYSE:BCR);
- -3 points - Brown-Forman Corporation (NYSE:BF.B);
- -3 points - McGraw-Hill Financial, Inc. (MHFI);
- -3 points - Pentair Ltd. (NYSE:PNR); and
- -3 points - Sherwin Williams Company (NYSE:SHW).
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.