Dividend Aristocrats Ranking: Part 2, The Light Heavyweights

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Includes: FDO, GPC, LOW, MCD, PPG, SHW, SIAL, T, WMT, XOM
by: Stan Stafford

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 10 scoring Dividend Aristocrat stocks that make up the Light 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.

The updates in the metric/weighting system were explained in detail in Part 1 of this series that focused on the top nine scoring Aristocrat stocks that make up the Heavyweight class.

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)  
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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.

This article, Part 2, will focus on the next highest scoring set of stocks, the Light Heavyweights, which include:

  • Sherwin-Williams (NYSE:SHW) - Total score of 162.7
  • PPG Industries (NYSE:PPG) - Total score of 162.3
  • Lowe's (NYSE:LOW) - Total score of 162.1
  • McDonald's (NYSE:MCD) - Total score of 161.5
  • Genuine Parts (NYSE:GPC) - Total score of 160.4
  • Family Dollar (NYSE:FDO) - Total score of 156.9
  • AT&T (NYSE:T) - Total score of 156.3
  • Wal-Mart (NYSE:WMT) - Total score of 156.2
  • Sigma Aldrich (NASDAQ:SIAL) - Total score of 155.6
  • ExxonMobil (NYSE:XOM) - Total score of 155

Sherwin-Williams

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 36 4 3.6
Current Dividend Yield 1.08% 2 3
Dividend Growth 223.50% 8 12
PE Ratio (trailing) 27.97x 5 5
PE Ratio (forward) 24.34x 7 7.7
Return on Assets 11.72% 12 12
Return on Equity 43.16% 15 15
10-Year Price Returns 405.70% 15 15
Revenue Growth 81.39% 8 11.2
Earnings Growth 189.40% 13 20.8
Return on Invested Capital 21.20% 14 16.8
Payout Ratio 27.71% 12 12
EPS Estimates for Current and Next 4 Quarters 14.71% 12 15.6
Price-to-Free Cash Flow 22.46x 11 11
Debt-to-Equity Ratio 0.97x 2

2

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Sherwin-Williams has a strong history of dividend and earnings growth, as well as, impressive returns on equity and invested capital. The company does have higher debt and a lower dividend yield than many Aristocrats.

PPG Industries

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 43 7 6.3
Current Dividend Yield 1.31% 2 3
Dividend Growth 48.89% 1 1.5
PE Ratio (trailing) 13.94x 14 14
PE Ratio (forward) 21.54x 10 11
Return on Assets 12.85% 13 13
Return on Equity 40.11% 15 15
10-Year Price Returns 232.30% 10 10
Revenue Growth 69.86% 8 11.2
Earnings Growth 345.60% 15 24
Return on Invested Capital 21.90% 14 16.8
Payout Ratio 20.93% 13 13
EPS Estimates for Current and Next 4 Quarters 7.09% 5 6.5
Price-to-Free Cash Flow 19.63x 12 12
Debt-to-Equity Ratio 0.69x 5

5

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PPG has seen impressive stock price returns along with strong revenue and earnings growth. While the company has increased dividends for 43 consecutive years, the growth over the past ten years has been less than 50%, one of the lowest values out of all the Dividend Aristocrats.

Lowe's

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 52 11 9.9
Current Dividend Yield 2% 5 7.5
Dividend Growth 1.05K% 15 22.5
PE Ratio (trailing) 20.41x 11 11
PE Ratio (forward) 17.70x 12 13.2
Return on Assets 7% 9 9
Return on Equity 19.02% 12 12
10-Year Price Returns 72.68% 3 3
Revenue Growth 58.48% 7 9.8
Earnings Growth 79.51% 8 12.8
Return on Invested Capital 10.65% 6 7.2
Payout Ratio 31.27% 11 11
EPS Estimates for Current and Next 4 Quarters 18.54% 14 18.2
Price-to-Free Cash Flow 15.11x 12 12
Debt-to-Equity Ratio 0.89x 3

3

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Unlike PPG, Lowe's dividend history has been very impressive. Combined with its estimated EPS growth, Lowe's is poised to continue providing nice returns for shareholders.

McDonald's

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 38 4 3.6
Current Dividend Yield 3.18% 9 13.5
Dividend Growth 47.27% 1 1.5
PE Ratio (trailing) 18.5x 12 12
PE Ratio (forward) 17.69x 12 13.2
Return on Assets 15.58% 15 15
Return on Equity 35.51% 15 15
10-Year Price Returns 278.90% 12 12
Revenue Growth 55.05% 7 9.8
Earnings Growth 293.70% 14 22.4
Return on Invested Capital 18.98% 12 14.4
Payout Ratio 56.95% 6 6
EPS Estimates for Current and Next 4 Quarters 9.25% 7 9.1
Price-to-Free Cash Flow 22.29x 11 11
Debt-to-Equity Ratio 0.88x 3

3

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McDonald's has the second highest yield out of this group of 10 stocks, but its dividend has been slow growing. It has seen a slow down of revenue growth, but the company has been able to continue showing impressive earnings growth and returns on assets, equity, and invested capital.

Genuine Parts

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 58 14 12.6
Current Dividend Yield 2.63% 7 10.5
Dividend Growth 91.67% 3 4.5
PE Ratio (trailing) 19.44x 12 12
PE Ratio (forward) 19.10x 12 13.2
Return on Assets 9.04% 11 11
Return on Equity 21.77% 13 13
10-Year Price Returns 122.40% 5 5
Revenue Growth 65.39% 8 11.2
Earnings Growth 109.30% 10 16
Return on Invested Capital 17.11% 11 13.2
Payout Ratio 47.61% 8 8
EPS Estimates for Current and Next 4 Quarters 6.96% 4 5.2
Price-to-Free Cash Flow 15.62x 12 12
Debt-to-Equity Ratio 0.23x 13

13

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Genuine Parts has a solid balance sheet and fairly attractive price. The company continues to see consistent and significant growth in both its dividend and earnings.

Family Dollar

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 38 4 3.6
Current Dividend Yield 1.80% 4 6
Dividend Growth 264.70% 10 15
PE Ratio (trailing) 16.51x 13 13
PE Ratio (forward) 15.52x 13 14.3
Return on Assets 10.19% 12 12
Return on Equity 25.49% 14 14
10-Year Price Returns 115.50% 5 5
Revenue Growth 94.86% 9 12.6
Earnings Growth 122.50% 11 17.6
Return on Invested Capital 17.53% 12 14.4
Payout Ratio 30.43% 11 11
EPS Estimates for Current and Next 4 Quarters 11.36% 9 11.7
Price-to-Free Cash Flow 103.63x 1 1
Debt-to-Equity Ratio 0.32x 11

11

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Family Dollar has seen impressive dividend growth. With low debt and a low payout ratio, the company's financials are stable. The company operates in a very competitive industry but has been able to maintain positive growth across both revenues and earnings.

AT&T

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 30 2 1.8
Current Dividend Yield 5.19% 15 22.5
Dividend Growth 47.20% 1 1.5
PE Ratio (trailing) 10.29x 14 14
PE Ratio (forward) 13.41x 14 15.4
Return on Assets 6.59% 8 8
Return on Equity 20.61% 13 13
10-Year Price Returns 43.90% 2 2
Revenue Growth 222.00% 14 19.6
Earnings Growth 117.40% 10 16
Return on Invested Capital 19.77% 13 15.6
Payout Ratio 52.70% 7 7
EPS Estimates for Current and Next 4 Quarters 5.55% 3 3.9
Price-to-Free Cash Flow 14.48x 13 13
Debt-to-Equity Ratio 0.82x 3

3

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AT&T has the highest yield out of this group of stocks and the 2nd highest yield out of all Aristocrats. The company has basically become an income investment. Its yield remains attractive, but its future dividend growth and revenue/earnings growth are likely to be slow moving.

Wal-Mart

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 41 6 5.4
Current Dividend Yield 2.54% 7 10.5
Dividend Growth 269.20% 10 15
PE Ratio (trailing) 15.62x 13 13
PE Ratio (forward) 14.64x 14 15.4
Return on Assets 7.76% 9 9
Return on Equity 21.71% 13 13
10-Year Price Returns 40.23% 2 2
Revenue Growth 74.12% 8 11.2
Earnings Growth 120.40% 11 17.6
Return on Invested Capital 11.94% 7 8.4
Payout Ratio 43.50% 9 9
EPS Estimates for Current and Next 4 Quarters 11.34% 9 11.7
Price-to-Free Cash Flow 20.62x 11 11
Debt-to-Equity Ratio 0.70x 4

4

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Wal-Mart has seen nice growth in earnings, revenue, and its dividend over the past 10 years. It has an attractive yield and a payout ratio that will support future growth.

Sigma Aldrich

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 38 4 3.6
Current Dividend Yield 0.91% 1 1.5
Dividend Growth 170.60% 6 9
PE Ratio (trailing) 24.82x 7 7
PE Ratio (forward) 23.25x 8 8.8
Return on Assets 13.25% 14 14
Return on Equity 17.88% 11 11
10-Year Price Returns 250.60% 11 11
Revenue Growth 100.90% 10 14
Earnings Growth 167.10% 12 19.2
Return on Invested Capital 15.70% 10 12
Payout Ratio 21.01% 13 13
EPS Estimates for Current and Next 4 Quarters 7.07% 5 6.5
Price-to-Free Cash Flow 22.10x 11 11
Debt-to-Equity Ratio 0.13x 14

14

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Sigma Aldrich has a strong balance sheet with low debt and a low payout ratio; however, it also has a low dividend yield. The company has seen impressive price returns as well as solid returns on assets and equity.

ExxonMobil

  Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 32 2 1.8
Current Dividend Yield 2.66% 7 10.5
Dividend Growth 155.60% 6 9
PE Ratio (trailing) 14.12x 14 14
PE Ratio (forward) 13.28x 14 15.4
Return on Assets 9.31% 11 11
Return on Equity 18.88% 12 12
10-Year Price Returns 132.10% 6 6
Revenue Growth 65.28% 8 11.2
Earnings Growth 124% 11 17.6
Return on Invested Capital 16.39% 11 13.2
Payout Ratio 35.12% 10 10
EPS Estimates for Current and Next 4 Quarters 0.11% 1 1.3
Price-to-Free Cash Flow 35.19x 8 8
Debt-to-Equity Ratio 0.13x 14

14

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ExxonMobil has a solid dividend yield and growth, along with low debt and payout ratio. The company has averaged double digit yearly growth in earnings and is attractively priced.

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 the stocks I personally like best are Lowe's, AT&T, McDonalds, and ExxonMobil. As always, I suggest individual investors perform their own research before making any investment decisions.

Part 3 of this article will feature the "Middleweight" Dividend Aristocrat stocks (11 stocks that have weighted scores between 154.1 and 140.3).

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.