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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 eight stocks that fit into the Bantamweight class of Dividend Champions include: MGEE, TMP, FRT, CINF, CTWS, ABM, UGI, and STR.

Overview

This is Part 8 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: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 8, I will be taking at look at the Bantamweight stocks which include:

  • MGE Energy (NASDAQ:MGEE) - Total score of 50.75
  • Tompkins Financial (NYSEMKT:TMP) - Total score of 50.75
  • Federal Realty Investment Trust (NYSE:FRT) - Total score of 50.25
  • Cincinnati Financial (NASDAQ:CINF) - Total score of 50
  • Connecticut Water Service (NASDAQ:CTWS) - Total score of 49.75
  • ABM Industries (NYSE:ABM) - Total score of 49.5
  • UGI Corporation (NYSE:UGI) - Total score of 49.5
  • Questar (NYSE:STR) - Total score of 49

MGE Energy

MGE Energy, Inc. is a public utility holding company in Wisconsin that operates through the following five segments: Regulated Electric Utility Operations; Regulated Gas Utility Operations; Nonregulated Energy Operations; Transmission Investments; and All Other. The company was founded in 1855 and is headquartered in Madison, Wisconsin.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases3864.5
Current Dividend Yield2.85%44
PE Ratio17.63x88
Return on Assets4.69%44
Return on Equity12.48%55
Asset Utilization0.37x42
3 Year Price Returns40.52%45
Dividend Growth12.68%35.25
Revenue Growth10.69%23
Earnings Growth46.61%5

10

MGE Energy has seen respectable earnings and dividend growth while maintaining an attractive PE ratio. With a payout ratio just under 50%, the company should be able to continue its consistent dividend growth.

Some recent developments concerning MGE Energy include:

  • Last month, MGE Energy released its quarterly Interim Report.

Tompkins Financial

Tompkins Financial Corporation is a community-based financial services company that offers commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, insurance, and brokerage services through the following three business segments: Banking, Insurance, and Wealth Management. The company was founded in 1836 and is headquartered in Ithaca, New York.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases2721.5
Current Dividend Yield3.40%55
PE Ratio13.55x99
Return on Assets1.03%22
Return on Equity11.48%55
Asset Utilization0.05x10.5
3 Year Price Returns15.28%33.75
Dividend Growth29.41%610.5
Revenue Growth50.75%57.5
Earnings Growth16.78%3

6

Tompkins Financial has seen fairly impressive revenue and dividend growth, with a decent yield over 3%. With a payout ratio of 44%, there is no reason to assume its dividend growth will not continue into the future.

Some recent developments concerning Tompkins Financial include:

  • In its recent quarterly report, Tompkins Financial reported earnings that increased 9.2% over the same period last year.

Federal Realty Investment Trust

Federal Realty Investment Trust is a real estate investment trust, that operates in the ownership, management, development, and redevelopment of retail and mixed-use properties. The company was founded in 1962 and is headquartered in Rockville, Maryland.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases4686
Current Dividend Yield2.78%44
PE Ratio45.44x22
Return on Assets4.01%44
Return on Equity12.03%55
Asset Utilization0.16x21
3 Year Price Returns38.96%45
Dividend Growth20.00%58.75
Revenue Growth20.15%34.5
Earnings Growth51.53%5

10

Federal Realty Investment Trust has seen respectable growth in its revenue, earnings, and dividend, but maintains a very high PE ratio and a payout ratio over 100%.

Some recent developments concerning Federal Realty Investment Trust include:

  • Last month, Federal Realty was upgraded to Buy by Zach's Equity Research.

Cincinnati Financial

Cincinnati Financial Corporation is a property casualty insurance business in the United States that operates in the following five segments: Commercial Lines Property Casualty Insurance; Personal Lines Property Casualty Insurance; Excess and Surplus Lines Property Casualty Insurance; Life Insurance; and Investments. The company was founded in 1950 and is headquartered in Fairfield, Ohio.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases5496.75
Current Dividend Yield3.73%66
PE Ratio15.07x88
Return on Assets3.02%33
Return on Equity8.97%44
Asset Utilization0.26x31.5
3 Year Price Returns43.10%45
Dividend Growth12.82%35.25
Revenue Growth16.09%34.5
Earnings Growth18.80%3

6

Cincinnati Financial has been very consistent. It hasn't seen any returns or growth that has been overly impressive, but the company does maintain a high yielding dividend that continues to slowly grow along with an attractive PE ratio.

Some recent developments concerning Cincinnati Financial include:

  • Cincinnati Financial recently reported Q1 2014 financial results.

Connecticut Water Service

Connecticut Water Service is a regulated water company that operates in the following three segments: Water Activities, Real Estate Transactions, and Services and Rentals. The company was founded in 1956 and is headquartered in Clinton, Connecticut.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases4475.25
Current Dividend Yield3.04%55
PE Ratio19.59x77
Return on Assets3.04%33
Return on Equity9.61%44
Asset Utilization0.15x21
3 Year Price Returns29.31%33.75
Dividend Growth11.24%35.25
Revenue Growth54.03%57.5
Earnings Growth40.00%4

8

Connecticut Water has a decent dividend yield and has seen decent growth in both revenue and earnings. With a payout ratio just under 60%, the company's dividend should remain safe into the future.

Some recent developments concerning Connecticut Water Service include:

  • Recently, Craig J. Patla was promoted to Vice President of Service Delivery.
  • Last month, David C. Benoit was promoted to Senior Vice President, Treasurer and CFO.

ABM Industries

ABM Industries Incorporated provides integrated facility solutions services. The company was founded in 1909 and is headquartered in New York, New York.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases4786
Current Dividend Yield2.19%33
PE Ratio21.81x77
Return on Assets3.44%33
Return on Equity8.11%44
Asset Utilization2.3x105
3 Year Price Returns12.72%22.5
Dividend Growth19.23%47
Revenue Growth38.13%46
Earnings Growth25.47%3

6

ABM Industries has seen decent revenue, earnings, and dividend growth. With a payout ratio of 35%, the dividend should be safe and continue growing into the future.

Some recent developments concerning ABM Industries include:

  • ABM Industries was recently awarded a contract to manage the transportation requirements of the LA/Ontario International Airport Consolidated Rental Car Facility.
  • ABM Industries is set to build a solar plant at Cornell University.

UGI Corporation

UGI Corporation distributes, stores, transports, and markets energy products and related services throughout various areas of the world. The company was founded in 1882 and is based in King of Prussia, Pennsylvania.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases2610.75
Current Dividend Yield2.50%33
PE Ratio17.57x88
Return on Assets2.92%33
Return on Equity11.97%55
Asset Utilization0.74x84
3 Year Price Returns40.70%45
Dividend Growth41.25%712.25
Revenue Growth25.39%34.5
Earnings Growth2.52%2

4

Even though earnings growth has been limited, the company has seen fairly impressive revenue growth and decent revenue growth. With a payout ratio of 43%, the company's dividend growth is poised to continue.

Some recent developments concerning UGI include:

  • Just today, UGI announced it is increasing its dividend by 4.4%.

Questar Corporation

Questar Corporation operates as an integrated natural gas company in the United States. The company was founded in 1922 and is headquartered in Salt Lake City, Utah.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases3453.75
Current Dividend Yield3.13%55
PE Ratio25.37x66
Return on Assets4.22%44
Return on Equity14.72%66
Asset Utilization0.32x42
3 Year Price Returns33.82%45
Dividend Growth44.00%712.25
Revenue Growth9.92%23
Earnings Growth-59.30%1

2

With a dividend yield over 3%, Questar has seen decent dividend growth along with returns on assets and equity; however, the company has seen slow revenue growth and declining earnings. The company also has a somewhat high payout ratio of 73%.

Some recent developments concerning Questar include:

  • Questar recently reported Q1 2014 earnings that rose 17%.
  • Questar recently started Construction on CNG-Fueling Station in DeSoto, Texas.

Final Analysis

Stocks in this class that I like the most include Tompkins Financial and UGI. I feel that Tompkins Financial's low PE ratio, high dividend yield, and rather consistent growth in revenue, earnings, and dividend will help to ensure significant long term returns for investors. UGI has the strongest dividend growth out of all of the stocks in this class, is fairly valued, and continues to see revenue and earnings growth.

There really isn't any stocks in this group that I would recommend investors avoid; however, I personally would not currently consider Federal Realty Investment Trust as I feel it is currently overvalued. I still think its a solid company, but I feel that its current price will limit future returns.

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 9 of this article will feature the 'Super Flyweight' Dividend Champion stocks (11 stocks that have weighted scores between 42 and 48.99).

Source: Dividend Champions Ranking: Part 8, The Bantamweights