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Summary

  • Dividend Aristocrat stocks are stocks that have increased dividends for at least 25 consecutive years.
  • Using an updated metric and weighting system, I have ranked the Dividend Aristocrats.
  • This article reviews the top 9 scoring Dividend Aristocrat stocks that make up the Heavyweight class.

Overview

In April/May, I wrote a series of articles that ranked the Dividend Champions, based on a variety of metrics. Part 1 of that article can be found here. Using an updated metrics and weighting system (based on several great comments and questions from readers of that series of articles), this series of articles will focus on ranking the Dividend Aristocrats.

Before I get into the details of the scoring and weighting system, I want to provide a brief summary of the differences between this updated system for the Dividend Aristocrats and the original used when ranking the Dividend Champions.

  • The original scoring system consisted of 10 metrics, while this one consists of 15. One metric (Asset Utilization) has been removed, and six additional metrics have been added: PE ratio (forward), Return on Invested Capital (NYSE:TTM), Payout Ratio, EPS Estimates for Current and Next Four Quarters, Price-to-Free Cash Flow , and Debt-to-Equity Ratio (annual).
  • The original scoring system went from 1-10 for each metric, while the updated version goes from 0-15.
  • Several of the metrics previously had a three- or five-year benchmark (i.e. revenue increase over the past five years, etc.). Many of the updated metrics now cover a ten-year period.
  • The previous scoring "buckets" were previously just created by equally dividing available scores (i.e. 0%-9.99% in one bucket, 10%-19.99% in another bucket, 20%-29.99% in another, and so on). In the updated metric system, I have analyzed the median and mode for each metric to ensure that more relevant "buckets" are produced. (For instance, if dividend yield ranges from 0.01% to 8%, but 90% of the stocks are in the 2% to 4% range, the majority of the "buckets" will fall into that range.)
  • Previously, I believe the weighting system was weighted too heavily. Each metric was weighted in the following manner (.25x, .50x, .75x, 1x, 1.25x, 1.50x, etc.). The updated weighting system will be along the lines of .80x, .90x, 1x, 1.1x, 1.2x, etc.)

Score And Weighting System

In ranking the Dividend Aristocrats, the following 15 metrics were used:

Scores 0-15
# of Years With Consecutive Dividend Increases
Current Dividend Yield
Dividend Growth (past ten years)
PE Ratio (trailing twelve months)
PE Ratio (forward)
Return on Assets (trailing twelve months)
Return on Equity (trailing twelve months)
10-Year Price Returns
Revenue Growth (past ten years)
Earnings Growth (past ten years)
Return on Invested Capital (trailing twelve months)
Payout Ratio (trailing twelve months)
EPS Estimates for Current and Next 4 Quarters
Price-to-Free Cash Flow (trailing twelve months)
Debt-to-Equity Ratio (Annual)

The next step was 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 (1.6x), Dividend Growth (1.5x), Dividend Yield (1.5x), Revenue Growth (1.4x), EPS Estimates for Current and Next 4 Quarters (1.3x), Return on Invested Capital (1.2x), Forward PE Ratio (1.1x), and # of Years With Consecutive Dividend Increases (0.9x). All remaining metrics are weighted to their original values.

After completing the analysis, the values assigned to individual stocks ranged from 198.40 to 97.90.

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. Also, due to the fairly recent spin-off related to Abbott Laboratories (NYSE:ABT) and AbbVie (NYSE:ABBV), I have decided to not include these stocks in the rankings, since a large portion of the metrics used look at historical data.

Just like with the Dividend Champions rankings, I have decided to use boxing weight classes to separate the attractiveness of these stocks (with "Heavyweights" being the most attractive stocks and "Lightweights" being the least attractive). For Part 1, I will be taking a look at the Heavyweight stocks, which include:

  • W.W. Grainger (NYSE:GWW) - Total score of 198.40
  • T. Rowe Price (NASDAQ:TROW) - Total score of 198.10
  • Franklin Resources (NYSE:BEN) - Total score of 189.10
  • VF Corporation (NYSE:VFC) - Total score of 188.40
  • CR Bard (NYSE:BCR) - Total score of 177.80
  • Hormel (NYSE:HRL) - Total score of 176.40
  • Dover (NYSE:DOV) - Total score of 167.60
  • 3M (NYSE:MMM) - Total score of 164.60
  • Aflac (NYSE:AFL) - Total score of 164.10

W.W. Grainger

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4376.3
Current Dividend Yield1.65%34.5
Dividend Growth440%1319.5
PE Ratio (trailing)23.15x88
PE Ratio (forward)20.70x1112.1
Return on Assets15.54%1515
Return on Equity24.93%1414
10-Year Price Returns366.90%1515
Revenue Growth97.22%912.6
Earnings Growth317.50%1524
Return on Invested Capital20.83%1416.8
Payout Ratio32.87%1111
EPS Estimates for Current and Next 4 Quarters14.50%1215.6
Price-to-Free Cash Flow26.90x1010
Debt-to-Equity Ratio0.17x14

14

W.W. Grainger scored the highest out of all Dividend Aristocrat stocks ranked. The company has seen impressive earnings growth and dividend growth, along with high returns on assets and equity. W.W. Grainger has seen great stock price appreciation, and continues to carry low debt.

T. Rowe Price

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases2710.9
Current Dividend Yield2.10%57.5
Dividend Growth363.20%1218
PE Ratio (trailing)20.46x1111
PE Ratio (forward)18.23x1213.2
Return on Assets22.17%1515
Return on Equity24.33%1414
10-Year Price Returns243.70%1111
Revenue Growth213.60%1419.6
Earnings Growth263.60%1422.4
Return on Invested Capital21.74%1416.8
Payout Ratio37.28%1010
EPS Estimates for Current and Next 4 Quarters11.55%911.7
Price-to-Free Cash Flow19.37x1212
Debt-to-Equity Ratio0.02x15

15

T. Rowe Price has seen consistent and impressive dividend, revenue, earnings, and stock price growth. The company has almost no debt and a strong return on invested capital.

Franklin Resources

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3432.7
Current Dividend Yield0.83%11.5
Dividend Growth323.50%1116.5
PE Ratio (trailing)16.51x1313
PE Ratio (forward)15.52x1314.3
Return on Assets14.35%1414
Return on Equity21.98%1313
10 Year Price Returns259.40%1422.40
Revenue Growth151.80%1216.80
Earnings Growth291.40%1422.40
Return on Invested Capital17.01%1113.2
Payout Ratio11.83%1414
EPS Estimates for Current and Next 4 Quarters11.49%911.7
Price-to-Free Cash Flow19.87x1212
Debt-to-Equity Ratio0.23x13

13

Franklin Resources has a low-yielding dividend, but has good dividend growth. This growth should continue, considering the company's very low payout ratio. With impressive revenue and earnings history and a strong balance sheet, Franklin Resources should continue to perform well.

VF Corporation

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4165.4
Current Dividend Yield1.68%34.5
Dividend Growth303.80%1116.5
PE Ratio (trailing)22.52x99
PE Ratio (forward)20.21x1112.1
Return on Assets12.42%1313
Return on Equity22.30%1313
10-Year Price Returns419.10%1515
Revenue Growth109.80%1014
Earnings Growth189.70%1320.8
Return on Invested Capital16.87%1113.2
Payout Ratio34.01%1111
EPS Estimates for Current and Next 4 Quarters17.54%1316.9
Price-to-Free Cash Flow23.08x1111
Debt-to-Equity Ratio0.24x13

13

VF Corporation's strengths can be seen in multiple areas. In my previous article, VF Corporation was the highest-ranked stock out of the Dividend Champions, and I'm glad to see it remains one of the highest-ranked stocks using the updated metric/weighting system.

CR Bard

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4265.4
Current Dividend Yield0.62%11.5
Dividend Growth83.33%34.5
PE Ratio (trailing)14.92x1414
PE Ratio (forward)16.99x1314.3
Return on Assets16.69%1515
Return on Equity41.03%1515
10-Year Price Returns144.20%66
Revenue Growth100.10%1014
Earnings Growth396.00%1524
Return on Invested Capital22.91%1416.8
Payout Ratio8.88%1515
EPS Estimates for Current and Next 4 Quarters13.11%1114.3
Price-to-Free Cash Flow11.31x1313
Debt-to-Equity Ratio0.67x5

5

CR Bard is the one stock out of this group that dividend investors may want to avoid. It has the lowest yield out of the heavyweight stocks, and its dividend growth is not that impressive either. Even with the less-than-impressive dividend performance, the company's financials, past stock performance, and balance sheet remain solid.

Hormel

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4898.1
Current Dividend Yield1.61%34.5
Dividend Growth255.60%1015
PE Ratio (trailing)23.78x88
PE Ratio (forward)22.83x99.9
Return on Assets11.52%1212
Return on Equity17.32%1111
10-Year Price Returns235.10%1010
Revenue Growth94.81%912.6
Earnings Growth154.70%1219.2
Return on Invested Capital16.06%1113.2
Payout Ratio33.93%1111
EPS Estimates for Current and Next 4 Quarters16.33%1316.9
Price-to-Free Cash Flow26.03x1010
Debt-to-Equity Ratio0.08x15

15

Hormel has seen nice dividend, revenue, earnings, and stock price growth over the past ten years. With low debt and a low payout ratio, Hormel remains a great defensive stock option.

Dover

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases591513.5
Current Dividend Yield1.65%34.5
Dividend Growth134.40%57.5
PE Ratio (trailing)16.42x1313
PE Ratio (forward)18.86x1213.2
Return on Assets9.39%1111
Return on Equity19.73%1212
10-Year Price Returns167.40%77
Revenue Growth73.97%811.2
Earnings Growth218.30%1422.4
Return on Invested Capital12.45%89.6
Payout Ratio26.38%1212
EPS Estimates for Current and Next 4 Quarters11.40%911.7
Price-to-Free Cash Flow19.13x1212
Debt-to-Equity Ratio0.53x7

7

With 59 consecutive years of dividend increases, Dover is as consistent as they come. The company continues to average impressive double-digit yearly dividend growth, along with impressive earnings.

3M

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases561311.7
Current Dividend Yield2.36%69
Dividend Growth137.50%57.5
PE Ratio (trailing)21.04x1010
PE Ratio (forward)19.44x1213.2
Return on Assets14.03%1414
Return on Equity26.70%1414
10-Year Price Returns66.71%33
Revenue Growth61.10%79.8
Earnings Growth98.10%914.4
Return on Invested Capital19.54%1315.6
Payout Ratio39.18%1010
EPS Estimates for Current and Next 4 Quarters10.50%810.4
Price-to-Free Cash Flow23.29x1111
Debt-to-Equity Ratio0.34x11

11

Even though it operates in a very competitive industry, 3M continues to deliver impressive growth and returns. The company has been able to keep its payout low, while growing its dividend year after year.

Aflac

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3121.8
Current Dividend Yield2.35%69
Dividend Growth289.50%1015
PE Ratio (trailing)9.78x1515
PE Ratio (forward)10.11x1415.4
Return on Assets2.49%22
Return on Equity20.21%1313
10-Year Price Returns55.60%33
Revenue Growth90.15%912.6
Earnings Growth291.60%1422.4
Return on Invested Capital15.27%1012
Payout Ratio21.31%1313
EPS Estimates for Current and Next 4 Quarters4.28%33.9
Price-to-Free Cash Flow3.52x1515
Debt-to-Equity Ratio0.34x11

11

Aflac is one of the more attractively priced stocks out of the Aristocrats. It has a strong balance sheet and an impressive history of revenue, earnings, and stock price growth.

Conclusion

These articles, 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 the right choice for you. Another step for individual investors might be to use the metrics I have included, but change the weight of them based on important factors to see how that affects overall scores.

I do feel that each of the stocks listed in this article is worth consideration as a long-term buy, but as always, I suggest individual investors perform their own research before making any investment decisions.

I know several investors tend to overlook the lower-yielding Dividend Aristocrats, but I feel like this is a mistake. There's a reason that these stocks rank high (5 out of these 9 Heavyweight stocks also ranked as "Heavyweights" when I reviewed the Dividend Champions). Many of the lower-yielding Aristocrats have been the best historical performers in terms of overall return, so unless investors need the dividend income right now, not considering the lower-yielding stocks is a move that shouldn't be made.

Part 2 of this article will feature the "Light Heavyweight" Dividend Aristocrat stocks (10 stocks that have weighted scores between 162.70 and 155).

I want to give a special thanks to Dave Fish and to the many readers who contributed comments/questions to my first series of articles related to ranking the Dividend Champions. After this series of articles ranking the Aristocrats is complete, I plan on writing another series that will rank the Dividend Contenders next month.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Dividend Aristocrats Ranking: Part 1, The Heavyweights