Dividend Champions Ranking: Part 7, The Featherweights

|
Includes: ADM, BMS, CBSH, CTBI, EFSI, NFG, RLI, RPM, SON, SYY, WEYS
by: Stan Stafford

Summary

Dividend Champion stocks are similar to Dividend Aristocrats in that they are dividend paying stocks that have increased dividends for at least 25 consecutive years.

Using 10 different metrics, I have ranked the Dividend Champions into different classes with 'Heavyweights' being the most attractive and 'Flyweights' being the least attractive.

The 11 stocks that make up the Featherweights class of Dividend Champions include: BMS, RPM, RLI, EFSI, NFG, SYS, WEYS, SON, CBSH, ADM, and CTBI.

Overview

This is Part 7 of a series of articles ranking the Dividend Champion stocks (currently 105 stocks compiled by Dave Fish). Part 1 (the Heavyweights) and Part 2 (the Light Heavyweights) can be found here and here.

In ranking the Dividend Champions, I have decided to use the following 10 metrics (full scoring system can be seen in Part 1):

  • # of Consecutive Years With Dividend Increases
  • Current Dividend Yield
  • PE Ratio (trailing twelve months)
  • Return on Assets (trailing twelve months)
  • Return on Equity (trailing twelve months)
  • Asset Utilization (trailing twelve months)
  • 3 Year Price Returns
  • Dividend Growth (past five years)
  • Revenue Growth (past five years)
  • Earnings Growth (past five years)

For each metric, a stock has been assigned a point value based on its current assessment. For example, a stock with a dividend yield of 5.50% would receive a 10 point value for that metric, while a stock with a 3.50% dividend yield would receive a 6 point value and a stock with a dividend yield less than 1.00% would receive a 1 point value. So for each metric, an initial point value of between 1 and 10 can be earned.

The next step I have taken is to apply a weight to certain metrics I feel more or less important than others. Because I consider myself a dividend growth investor, the metrics with the highest weights are earnings growth (2.0x) , dividend growth (1.75x), revenue growth (1.5x), and 3 year price returns (1.25x). # of consecutive years with dividend increases is weighted at 0.75x and asset utilization is weighted at 0.50x, while all remaining metrics are weighted to their original values.

After completing the analysis, the values assigned to individual stocks ranged from 92 to 23.50.

Note: Because of the high number of stocks being evaluated, I relied on data provided by ycharts rather than calculating my own ratios/values for each metric. Because of this, the stock Computer Services (OTCQX:OTCQX:CSVI) has not been included in the analysis as required data was not available. So, 104 out of the 105 dividend champions will be included in this series of articles.

For Part 7, I will be taking at look at the Featherweight stocks which include:

  • Bemis (NYSE:BMS) - Total score of 56.5
  • RPM International (NYSE:RPM) - Total score of 56.5
  • RLI (NYSE:RLI) - Total score of 56.25
  • Eagle Financial Services (OTCQX:EFSI) - Total score of 55.75
  • National Fuel Gas (NYSE:NFG)- Total score of 54.25
  • Sysco (NYSE:SYY) - Total score of 54.25
  • Weyco Group (NASDAQ:WEYS) - Total score of 54.25
  • Sonoco Products (NYSE:SON) - Total score of 53
  • Commerce Bancshares (NASDAQ:CBSH) - Total score of 51.75
  • Archer Daniels Midland (NYSE:ADM) - Total score of 51.5
  • Community Trust Bancorp (NASDAQ:CTBI) - Total score of 51.5

Bemis

Bemis manufactures and sells packaging products through its three segments: U.S. Packaging, Global Packaging, and Pressure Sensitive Materials. The company was founded in 1858 and is headquartered in Neenah, Wisconsin.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 31 4 3
Current Dividend Yield 2.68% 4 4
PE Ratio 19.72x 7 7
Return on Assets 5.08% 4 4
Return on Equity 12.91% 5 5
Asset Utilization 1.2x 10 5
3 Year Price Returns 24.25% 3 3.75
Dividend Growth 20.00% 5 8.75
Revenue Growth 43.11% 4 6
Earnings Growth 49.28% 5

10

Click to enlarge

Looking at the table above you can see that Bemis has seen decent dividend, revenue, and earnings growth. The company's payout ratio is just above 50% which should allow the company to continues its streak of annual dividend increases.

Some recent developments concerning Bemis include:

  • Bemis recently reported Q1 earnings that were 9.4% higher than the same period last year.
  • At the beginning of April, Bemis completed the sale of its paper packaging division.

RPM International

RPM International manufactures, markets, and sells specialty chemical products for industrial and consumer markets throughout the world. The company was founded in 1947 and is headquartered in Medina, Ohio.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 40 6 4.5
Current Dividend Yield 2.35% 3 3
PE Ratio 21.83x 7 7
Return on Assets 6.14% 5 5
Return on Equity 19.86% 8 8
Asset Utilization 1.06x 10 5
3 Year Price Returns 74.63% 7 8.75
Dividend Growth 20.00% 5 8.75
Revenue Growth 21.09% 3 4.5
Earnings Growth -19.40% 1

2

Click to enlarge

RPM International has seen fairly impressive returns on assets and equity, along with decent dividend and revenue growth. Even with the company's issues with declining earnings, its has been able to keep its payout ratio under 50%.

A few recent developments concerning RPM International include:

  • RPM's most recent quarterly earnings increased 71% compared to the same period last year.
  • RPM recently raised its full year profit outlook.

RLI

RLI underwrites property and casualty insurance primarily throughout the United States. The company was founded in 1965 and is headquartered in Peoria, Illinois.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 38 6 4.5
Current Dividend Yield 1.61% 2 2
PE Ratio 14.56x 9 9
Return on Assets 4.65% 4 4
Return on Equity 15.26% 6 6
Asset Utilization 0.26x 3 1.5
3 Year Price Returns 45.04% 5 6.25
Dividend Growth 25.93% 6 10.5
Revenue Growth 29.10% 3 4.5
Earnings Growth 35.63% 4

8

Click to enlarge

RLI has a fairly consistent overall financial condition. Return on assets is a bit low, but with an attractive PE ratio, and a fairly high payout ratio of 72%.

Some recent developments concerning RLI include:

  • RLI's recently reported Q1 earnings was an increase of 9.6% over the same period last year. (fourth straight quarter of positive surprises)

Eagle Financial Services

Eagle Financial Services operates as the bank holding company for Bank of Clarke County that provides retail and commercial banking services throughout Northwestern Virginia. The company was founded in 1881 and is headquartered in Berryville, Virginia.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 27 2 1.5
Current Dividend Yield 3.37% 5 5
PE Ratio 10.72x 9 9
Return on Assets 1.22% 2 2
Return on Equity 11.02% 5 5
Asset Utilization 0.05x 1 0.5
3 Year Price Returns 39.01% 4 5
Dividend Growth 11.76% 3 5.25
Revenue Growth 18.30% 3 4.5
Earnings Growth 93.58% 9

18

Click to enlarge

Eagle Financial Services has seen impressive earnings growth and maintains a low payout ratio of 27% with a competitive yield over 3%.

Some recent developments concerning Eagle Financial Services include:

  • Eagle Financial Services reported a decrease in earnings in its latest quarterly report.

National Fuel Gas Company

National Fuel Gas Company is a diversified energy company in the United States that operates in the following segments: Utility, Pipeline and Storage, Exploration and Production, Energy Marketing, and Gathering. The company was founded in 1902 and is headquartered in Williamsville, New York.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 43 7 5.25
Current Dividend Yield 2.18% 3 3
PE Ratio 21.19x 7 7
Return on Assets 4.39% 4 4
Return on Equity 12.89% 5 5
Asset Utilization 0.31x 4 2
3 Year Price Returns 7.14% 1 1.25
Dividend Growth 11.94% 3 5.25
Revenue Growth -10.80% 1 1.5
Earnings Growth 146.80% 10

20

Click to enlarge

National Fuel Gas has seen impressive earnings growth over the past five years, but with decreasing revenue. The company's payout ratio remains low at 34%, which should allow the company to continue slowly growing its dividend into the future.

Some recent developments concerning National Fuel Gas include:

  • Last month, National Fuel Gas confirmed its capital expenditure and production guidance ranges for fiscal years 2014 and 2015.

Sysco

Sysco Corporation markets and distributes a range of food and related products to various foodservice industries. The company was founded in 1969 and is headquartered in Houston, Texas.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 44 7 5.25
Current Dividend Yield 3.28% 5 5
PE Ratio 21.37x 7 7
Return on Assets 7.68% 5 5
Return on Equity 19.05% 8 8
Asset Utilization 3.56x 10 5
3 Year Price Returns 24.48% 3 3.75
Dividend Growth 20.83% 5 8.75
Revenue Growth 20.51% 3 4.5
Earnings Growth -5.08% 1

2

Click to enlarge

Along with its dividend that yields over 3%, Sysco has seen impressive returns on earnings and equity, but has seen declining earnings over the past five years. The company's payout ratio has increased from under 50% to 67% over the past several years.

Some recent developments concerning Sysco include:

  • Sysco won a number of high dollar food service contracts.

Weyco Group

Weyco Group is a distributor and retailer of footwear, operating in the following two segments: North American Wholesale and North American Retail. The company was founded in 1896 and is headquartered in Milwaukee, Wisconsin.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 32 4 3
Current Dividend Yield 2.83% 4 4
PE Ratio 15.69x 8 8
Return on Assets 6.55% 5 5
Return on Equity 9.80% 4 4
Asset Utilization 1.12x 10 5
3 Year Price Returns 6.40% 2 2.5
Dividend Growth 20.00% 5 8.75
Revenue Growth 33.28% 4 6
Earnings Growth 42.98% 4

8

Click to enlarge

Weyco Group has seen average dividend, revenue, and earnings growth. The company's payout ratio remains low at under 25%, which should lead to consistent growth in its dividend going forward.

Sonoco Products

Sonoco Products manufactures and sells industrial and consumer packaging products in the United States, Europe, and Canada through the following four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions. The company was founded in 1899 and is headquartered in Hartsville, South Carolina.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 31 4 3
Current Dividend Yield 3.05% 5 5
PE Ratio 19.19x 7 7
Return on Assets 5.44% 4 4
Return on Equity 14.03% 6 6
Asset Utilization 1.20x 10 5
3 Year Price Returns 15.80% 3 3.75
Dividend Growth 14.81% 3 5.25
Revenue Growth 34.77% 4 6
Earnings Growth 42.67% 4

8

Click to enlarge

Sonoco Products yields a dividend over 3% with a payout ratio of 57% along with decent growth in revenue and earnings.

Some recent developments concerning Sonoco Products include:

  • Sonoco's new plastics facility achieves LEED Silver Certification.
  • Earlier in the month, Sonoco reported Q1 earnings that rose 4% over the same period prior year.

Commerce Bancshares

Commerce Bancshares operates as the bank holding company for Commerce Bank that provides retail, corporate, investment, trust, and asset management products and services to individuals and businesses through the following three segments: Consumer, Commercial, and Wealth. The company was founded in 1865 and is headquartered in Kansas, Missouri.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 46 8 6
Current Dividend Yield 2.11% 3 3
PE Ratio 15.44x 8 8
Return on Assets 1.17% 2 2
Return on Equity 12.08% 5 5
Asset Utilization 0.05x 1 0.5
3 Year Price Returns 20.63% 3 3.75
Dividend Growth 25.63% 6 10.5
Revenue Growth 0.42% 2 3
Earnings Growth 59.61% 5

10

Click to enlarge

Commerce Bancshares have seen fairly impressive earnings and dividend growth over the past five years. With a payout ratio just over 30%, the company's dividend growth should continue into the future.

Some recent developments concerning Commerce Bancshares include:

  • Commerce Bancshares missed on earnings and revenues on its latest quarterly report.

Archer Daniels Midland

Archer Daniels Midland procures, transports, stores, processes, and merchandises agricultural commodities and products through the following segments: Oilseeds Processing, Corn Processing, and Agricultural Services. The company was founded in 1898 and is headquartered in Decatur, Illinois (although the company has announced it is moving its headquarters to Chicago).

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 39 6 4.5
Current Dividend Yield 2.17% 3 3
PE Ratio 21.76x 7 7
Return on Assets 3.16% 3 3
Return on Equity 6.08% 3 3
Asset Utilization 2.12x 10 5
3 Year Price Returns 25.23% 3 3.75
Dividend Growth 71.43% 9 15.75
Revenue Growth 29.76% 3 4.5
Earnings Growth -22.30% 1

2

Click to enlarge

ADM has seen impressive dividend growth, with a decent yield and payout ratio of 37%. The company has struggled; however, with declines in earnings.

Some recent developments concerning Archer Daniels Midland include:

  • ADM's recent quarterly report saw earnings rise while revenues fell.
  • Earlier this month, ADM announced that it will vend fertilizer and chocolate businesses.

Community Trust Bancorp

Community Trust Bancorp operates as a bank holding company of Community Trust Bank, Inc. and Community Trust and Investment Company that provide commercial and personal banking, and trust and wealth management services to small and mid-sized communities. The company was founded in 1903 and is headquartered in Pikeville, Kentucky.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 33 4 3
Current Dividend Yield 3.26% 5 5
PE Ratio 13.61x 9 9
Return on Assets 1.24% 2 2
Return on Equity 11.13% 5 5
Asset Utilization 0.05x 1 0.5
3 Year Price Returns 43.03% 4 5
Dividend Growth 6.67% 2 3.5
Revenue Growth 25.22% 3 4.5
Earnings Growth 74.70% 7

14

Click to enlarge

Community Trust Bancorp has an impressive dividend yield, earnings growth, and an attractive valuation. The company's payout ratio remains stable at just under 55%.

Some recent developments concerning Community Trust Bancorp include:

  • Today, Community Trust Bancorp declared a special 10% dividend.
  • Community Trust Bancorp reported Q1 earnings results.
  • Community Trust Bancorp was named as one of America's 50 most trustworthy financial companies by Forbes magazine.

Final Analysis

With the exception of ADM, I like all of the stocks in this class of Dividend Champions. Even though ADM has seen earnings decrease over the past five years, I have to admit that my personal reasons for disliking the stock are heavily attributed to past scandals with the company and I still find it difficult to have complete trust in the company. And with the company's problems with decreasing earnings, it's not a stock I'm willing to gamble on.

My favorite stock out of this class would probably have to be Community Trust Bancorp. It has a very attractive PE ratio, a dividend yield over 3%, and impressive earnings growth. I feel that the company's recent announcement of its special dividend is a sign that management has faith in strong financial performance for the company in the future.

I feel that each of the remaining stocks are all worth considering as well as long term buys. Some of the companies that have long term earnings declines seem to be turning the corner, while other companies with long term earnings increases have seen recent short-term issues. I think the long term outlook for the companies remain strong.

Conclusion

This ranking system, just like any other investment screen, ranking, or rating system, should be the first step in a long line of analysis to determine whether or not a stock is a right choice for you. Based on some excellent questions and comments I received from earlier parts of this article series, I am already in the process of revising my metrics and weighting system for any future series of articles.

As always, I suggest individual investors perform their own research before making any investment decisions. Part 8 of this article will feature the 'Bantamweight' Dividend Champion stocks (8 stocks that have weighted scores between 49 and 50.99).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.