Dividend Champions Ranking: Part 8, The Bantamweights

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 |  Includes: ABM, CINF, CTWS, FRT, MGEE, STR, TMP, UGI
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 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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 38 6 4.5
Current Dividend Yield 2.85% 4 4
PE Ratio 17.63x 8 8
Return on Assets 4.69% 4 4
Return on Equity 12.48% 5 5
Asset Utilization 0.37x 4 2
3 Year Price Returns 40.52% 4 5
Dividend Growth 12.68% 3 5.25
Revenue Growth 10.69% 2 3
Earnings Growth 46.61% 5

10

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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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 27 2 1.5
Current Dividend Yield 3.40% 5 5
PE Ratio 13.55x 9 9
Return on Assets 1.03% 2 2
Return on Equity 11.48% 5 5
Asset Utilization 0.05x 1 0.5
3 Year Price Returns 15.28% 3 3.75
Dividend Growth 29.41% 6 10.5
Revenue Growth 50.75% 5 7.5
Earnings Growth 16.78% 3

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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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 46 8 6
Current Dividend Yield 2.78% 4 4
PE Ratio 45.44x 2 2
Return on Assets 4.01% 4 4
Return on Equity 12.03% 5 5
Asset Utilization 0.16x 2 1
3 Year Price Returns 38.96% 4 5
Dividend Growth 20.00% 5 8.75
Revenue Growth 20.15% 3 4.5
Earnings Growth 51.53% 5

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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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 54 9 6.75
Current Dividend Yield 3.73% 6 6
PE Ratio 15.07x 8 8
Return on Assets 3.02% 3 3
Return on Equity 8.97% 4 4
Asset Utilization 0.26x 3 1.5
3 Year Price Returns 43.10% 4 5
Dividend Growth 12.82% 3 5.25
Revenue Growth 16.09% 3 4.5
Earnings Growth 18.80% 3

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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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 44 7 5.25
Current Dividend Yield 3.04% 5 5
PE Ratio 19.59x 7 7
Return on Assets 3.04% 3 3
Return on Equity 9.61% 4 4
Asset Utilization 0.15x 2 1
3 Year Price Returns 29.31% 3 3.75
Dividend Growth 11.24% 3 5.25
Revenue Growth 54.03% 5 7.5
Earnings Growth 40.00% 4

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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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 47 8 6
Current Dividend Yield 2.19% 3 3
PE Ratio 21.81x 7 7
Return on Assets 3.44% 3 3
Return on Equity 8.11% 4 4
Asset Utilization 2.3x 10 5
3 Year Price Returns 12.72% 2 2.5
Dividend Growth 19.23% 4 7
Revenue Growth 38.13% 4 6
Earnings Growth 25.47% 3

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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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 26 1 0.75
Current Dividend Yield 2.50% 3 3
PE Ratio 17.57x 8 8
Return on Assets 2.92% 3 3
Return on Equity 11.97% 5 5
Asset Utilization 0.74x 8 4
3 Year Price Returns 40.70% 4 5
Dividend Growth 41.25% 7 12.25
Revenue Growth 25.39% 3 4.5
Earnings Growth 2.52% 2

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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.

Value Metric Score Weighted Metric Score
# Of Consecutive Years With Dividend Increases 34 5 3.75
Current Dividend Yield 3.13% 5 5
PE Ratio 25.37x 6 6
Return on Assets 4.22% 4 4
Return on Equity 14.72% 6 6
Asset Utilization 0.32x 4 2
3 Year Price Returns 33.82% 4 5
Dividend Growth 44.00% 7 12.25
Revenue Growth 9.92% 2 3
Earnings Growth -59.30% 1

2

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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).

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.