The Capital IQ database was used to run a screen with the purpose of finding stocks which had a history of increasing dividends, high dividend growth rates, and rising revenue. The methodology and the reasoning behind it is described below.
(1) As a small time investor, my brokerage firm allows trading on stocks on the Canadian and US stock exchanges. Hence, my first screen was for stocks that are listed on the Toronto Stock Exchange (TSX) or on major US Exchanges (NYSE, AMEX, NASDAQ).
(2) My second screen was for stocks that had a history of raising the dividends per share. Specifically, I was looking for stocks that had a compound annual growth rate (CAGR) greater than 10 percent over a 10 year period.
(3) To rule out companies that had a flat dividend for many years, and then a sudden jump in dividends; I put in a rule that the dividend per share for the 2009 fiscal year was greater than the dividend per share for the 2008 fiscal year. In turn, the dividend per share for the 2008 fiscal year was greater than the dividend per share for the 2007 fiscal year. I repeated one more time for the 2007 vs the 2006 fiscal year.
(4) To be sure that the companies selected were ‘growing’ companies, I repeated the above rule using revenues. That is the total revenue for 2009 was greater than the total revenue for 2008, and so forth for 2008 vs 2007, and 2007 vs 2006.
(5) Finally, I made sure that the companies were “solid” by selecting companies who had positive levered free cash flow for 2007, then 2008, and finally for 2009.
The final list of selected companies included some well known and some not so well known names. The company with the highest CAGR was Shaw Communications (NYSE:SJR) listed on the TSX with a CAGR of 56.2 percent. Following Shaw was Teva Pharmaceuticals (NASDAQ:TEVA) with 33.8 percent, Strayer Education (NASDAQ:STRA) with 28.5 percent, Cardinal Health (NYSE:CAH) with 26.4 percent, FactSet Research Systems, Inc. (NYSE:FDS) with 26.4 percent. Others on the list in descending order are Ross Stores (NASDAQ:ROST) (25), TJX Companies (NYSE:TJX) (21.5), Jack Henry & Associates (NASDAQ:JKHY) (20.9), Wal-Mart Stores (NYSE:WMT) (20.8), Paychex (NASDAQ:PAYX) (19.8), Getty Realty (NYSE:GTY) (18), Raven Industries (NASDAQ:RAVN) (17.9), Medtronic (NYSE:MDT) (17.8), Rollins Inc (NYSE:ROL) (17.7), Nike (NYSE:NKE) (15.8), Novartis (NYSE:NVS) (15.5), Automatic Data Processing (NASDAQ:ADP) (15.1), Walgreen (WAG) (14.7), Becton, Dickinson and Company (NYSE:BDX) (14.7), Aaron’s Inc (NYSE:AAN) (14.6), AstraZeneca (NYSE:AZN) (12.6), General Dynamics (NYSE:GD) (12.3), Atlantic Tele-Network (NASDAQ:ATNI) (12.1), Lockheed Martin (NYSE:LMT) (12), Harris Corp (NYSE:HRS) (11.5), Church & Dwight (NYSE:CHD) (11), McCormick (NYSE:MKC) (10.8), Family Dollar Stores (NYSE:FDO) (10.8), and CVS Caremark (NYSE:CVS) (10.6).
Disclosure: No positions in any of the above