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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 ten stocks that fit into the Flyweight category of the Dividend Champions include: NWN, UBSI, ED, UHT, TDS, EGN, MCY, WGL, DBD, and BRC.

Overview

This is the last 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 10, I will be taking at look at the Flyweight stocks which include:

  • Northwest Natural (NYSE:NWN) - Total score of 41.75
  • United Bankshares (NASDAQ:UBSI) - Total score of 40.75
  • Consolidated Edison (NYSE:ED) - Total score of 40.5
  • Universal Health Realty (NYSE:UHT) - Total score of 40
  • Telephone and Data (NYSE:TDS) - Total score of 38.5
  • Energen (NYSE:EGN) - Total score of 36.5
  • Mercury General (NYSE:MCY) - Total score of 35.5
  • WGL Holdings (NYSE:WGL) - Total score of 34.5
  • Diebold (NYSE:DBD) - Total score of 32.25
  • Brady (NYSE:BRC) - Total score of 23.5

Northwest Natural

Northwest Natural Gas Company stores and distributes natural gas primarily in Oregon, Washington, and California and operates in the following two operating segments: Local Gas Distribution and Gas Storage. The company was founded in 1859 and is headquartered in Portland, Oregon.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases58107.5
Current Dividend Yield4.18%77
PE Ratio19.63x77
Return on Assets2.14%33
Return on Equity8.14%44
Asset Utilization0.27x31.5
3 Year Price Returns-2.61%11.25
Dividend Growth16.46%47
Revenue Growth-25.10%11.5
Earnings Growth-20.80%1

2

The company maintains a high dividend yield with decent growth, but has seen declines in revenue and earnings over the past five years.

Some recent developments concerning Northwest Natural include:

  • Northwest Natural released Q1 2014 earnings results.
  • Northwest Natural is partnering with EnerG2 to improve the fuel storage on board vehicles that use Compressed Natural Gas.

United Bankshares

United Bankshares, Inc. provides commercial and retail banking services and products in the United States. The company was founded in 1893 and is headquartered in Charleston, West Virginia.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases4064.5
Current Dividend Yield4.30%77
PE Ratio17.48x88
Return on Assets1.01%22
Return on Equity8.46%44
Asset Utilization0.04x10.5
3 Year Price Returns12.58%22.5
Dividend Growth10.34%35.25
Revenue Growth12.77%23
Earnings Growth9.68%2

4

The company has a high dividend yield, an attractive PE ratio, and slow dividend, revenue, and earnings growth. The company's payout ratio is at 73%, which is a bit high, but should allow room for continued slow growth of the company's dividend.

Some recent developments concerning United Bancshares include:

  • United Bancshares reported an increase in earnings in its latest quarterly report.

Consolidated Edison

Consolidated Edison, Inc. is engaged in regulated electric, gas, and steam delivery businesses throughout the United States. The company was founded in 1884 and is based in New York, New York.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases4064.5
Current Dividend Yield4.53%88
PE Ratio15.39x88
Return on Assets2.56%33
Return on Equity8.84%44
Asset Utilization0.30x31.5
3 Year Price Returns9.27%22.5
Dividend Growth6.78%23.5
Revenue Growth-5.20%11.5
Earnings Growth14.56%2

4

The company offers a high yield dividend and a fairly priced PE. The company has seen low earnings growth, but a drop in revenue over the past five years. The company's payout ratio is at 68%.

Some recent developments concerning Consolidated Edison include:

  • Consolidated Edison recently installed a solar array on its Manhattan office tower.

Universal Health Realty

Universal Health Realty Income Trust is a publicly owned real estate investment trust. The company was founded in 1986 and is based in King of Prussia, Pennsylvania.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases2721.5
Current Dividend Yield5.84%1010
PE Ratio41.36x22
Return on Assets3.48%33
Return on Equity7.75%44
Asset Utilization0.14x21
3 Year Price Returns3.86%22.5
Dividend Growth5.04%23.5
Revenue Growth70.08%710.5
Earnings Growth-33.30%1

2

UHT has a high dividend yield, a high PE ratio, solid revenue growth, but a decline in earnings. The company's payout ratio is high and well above 100%.

Some recent developments concerning UHT include:

  • The company reported an increase in earnings in its Q1 2014 report.

Telephone and Data

Telephone and Data Systems, Inc. provides wireless and wireline telecommunications services in the United States. The company was founded in 1968 and is headquartered in Chicago, Illinois.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases4064.5
Current Dividend Yield2.04%33
PE Ratio20.46x77
Return on Assets1.63%22
Return on Equity3.48%22
Asset Utilization0.56x63
3 Year Price Returns-14.04%11.25
Dividend Growth35.50%712.25
Revenue Growth-2.36%11.5
Earnings Growth-17.70%1

2

The company has seen decent dividend growth over the past five years but has seen a decline in revenue and earnings over that same period. The company's payout ratio remains low at 36%, which should lead to future dividend growth.

Some recent developments concerning TDS include:

  • TDS reported larger losses than expected in recent earnings report.
  • TDS recently agreed to acquire BendBroadband.

Energen

Energen Corporation is engaged in the development and exploration of oil, natural gas, and natural gas liquids in the continental United States. The company was founded in 1929 and is headquartered in Birmingham, Alabama.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases3243
Current Dividend Yield0.77%11
PE Ratio27.80x55
Return on Assets3.18%33
Return on Equity7.42%44
Asset Utilization0.28x31.5
3 Year Price Returns23.25%33.75
Dividend Growth20.00%58.75
Revenue Growth20.70%34.5
Earnings Growth-20.90%1

2

The company has a low dividend yield, but has seen decent dividend and revenue growth. Earnings have declined over the past five years.

Some recent developments concerning Energen include:

  • Energen reported a decline in earnings in its latest quarterly report.
  • Energen's Wolfcamp "A" Well generates strong rates.

Mercury General

Mercury General Corporation writes personal automobile insurance solutions. The company was founded in 1960 and is headquartered in Los Angeles, California.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases2721.5
Current Dividend Yield5.44%99
PE Ratio22.18x66
Return on Assets2.63%33
Return on Equity6.09%33
Asset Utilization0.66x73.5
3 Year Price Returns13.78%22.5
Dividend Growth6.03%23.5
Revenue Growth-9.63%11.5
Earnings Growth-72.30%1

2

The company has a high yield, slow growing dividend, but has seen declines in both revenues and earnings. With a payout ratio over 100%, the dividend will continue to grow at a slow pace if growth does indeed continue.

Some recent developments concerning Mercury General include:

  • Mercury General reported an increase in operating earnings in its latest quarterly report.

WGL Holdings

WGL Holdings, Inc. sells and delivers natural gas, and provides energy-related products and services through the following four operating segments: Regulated Utility, Retail Energy-Marketing, Commercial Energy Systems, and Midstream Energy Services. The company was founded in 1848 and is headquartered in Washington, the District of Columbia.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases3864.5
Current Dividend Yield4.53%88
PE Ratio43.06x22
Return on Assets1.10%22
Return on Equity3.64%22
Asset Utilization0.57x63
3 Year Price Returns1.94%22.5
Dividend Growth19.73%47
Revenue Growth-8.89%11.5
Earnings Growth-35.40%1

2

WGL has a high dividend yield with decent growth, but also carries a high PE ratio and declines in revenue and earnings over the past five years.

Some recent developments concerning WGL include:

  • WGL will report quarterly results after market close today.

Diebold

Diebold, Incorporated provides integrated self-service delivery and security systems and services primarily to the financial, commercial, retail, and other markets throughout the world. The company was founded in 1859 and is headquartered in North Canton, Ohio.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases60107.5
Current Dividend Yield2.95%44
PE RatioN/A11
Return on Assets-7.42%11
Return on Equity-26.18%11
Asset Utilization1.17x105
3 Year Price Returns10.52%22.5
Dividend Growth10.58%35.25
Revenue Growth5.12%23
Earnings Growth-831%1

2


The company has a decent yield, but has seen a large decrease in earnings over the past five years and continues to have problems maintaining positive returns on assets and equity.

Some recent developments concerning Diebold are:

  • Diebold recently reported Q1 2014 earnings results.
  • Recently, Diebold annonuced an agreement with Accenture to aid in the enhancement of business processes.

Brady

Brady Corporation manufactures and supplies identification solutions, specialty materials, and workplace safety products throughout various areas of the world. The company was founded in 1914 and is headquartered in Milwaukee, Wisconsin.

ValueMetric ScoreWeighted Metric Score
# Of Consecutive Years With Dividend Increases2821.5
Current Dividend Yield3.08%55
PE RatioN/A11
Return on Assets-8.48%11
Return on Equity-14.32%11
Asset Utilization0.77x84
3 Year Price Returns-31.59%11.25
Dividend Growth14.71%35.25
Revenue Growth-4.68%11.5
Earnings Growth-327%1

2

Things haven't been pretty for Brady as it has seen negative revenue and dividend growth over the past five years, negative price returns over the past three, and currently have negative returns on assets and equity for the trailing twelve months.

Some recent developments concerning Brady include:

  • Brady closed the first phase of sale of its Die-Cut business
  • PDC Healthcare, a Brady acquisition, announced the release of its new TEMPbadge® Visitor Management System.

Final Analysis

Considering this is the last of a ten part series in which I have already looked at 94 other Dividend Champions, it is difficult to recommend any of the stocks in this class as better options than those previously reviewed. However, just because these are not ranked higher, doesn't mean they should strictly be avoided.

My favorite stock out of the ten would have to be United Bancshares. It has a high yielding dividend and has seen positive growth in both revenue and earnings over the past five years. Combine that with double digit dividend growth over the same period, a fairly valued PE, and a satisfactory recent quarterly report, I think the stock has the potential to reward long term shareholders nicely.

Two other stocks I like in this group on more of an income oriented basis are Consolidated Edison and Universal Health Realty. I feel that these two companies offer high yielding safe dividends and that the potential for large losses in terms of stock price is limited over the long run.

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.

For those who found this series of articles informative and useful, I plan on writing a similar series of articles later in the month related to the Dividend Contenders with updated metrics and weightings based on the great questions and comments I have received from readers throughout this series of articles. I would like to give a special thanks to Dave Fish for his great work in maintaining and updating the Dividend Champions, Contenders, and Challengers list. And also a special thanks to those who commented on this series of articles. Your comments and questions really help me improve my analysis and writing moving forward.

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.

Source: Dividend Champions Ranking: Part 10, The Flyweights