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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 12 Dividend Aristocrat stocks that make up the Super Lightweight 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)

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 4, will focus on the next highest scoring set of stocks, the Super Lightweights, which include:

  • Coca-Cola (NYSE:KO) - Total score of 139.7
  • Procter & Gamble (NYSE:PG) - Total score of 139.3
  • Medtronic (NYSE:MDT) - Total score of 139
  • Becton, Dickinson and Company (NYSE:BDX) - Total score of 138.8
  • Kimberly Clark (NYSE:KMB) - Total score of 138.6
  • Pentair (NYSE:PNR) - Total score of 137.8
  • Ecolab (NYSE:ECL) - Total score of 137.1
  • Clorox (NYSE:CLX) - Total score of 135.3
  • Target (NYSE:TGT) - Total score of 134.9
  • McGraw-Hill (NYSE:MHFI) - Total score of 133.8
  • McCormick (NYSE:MKC) - Total score of 132.6
  • Sysco (NYSE:SYY) - Total score of 130.8

Coca-Cola

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases52119.9
Current Dividend Yield2.93%812
Dividend Growth144%57.5
PE Ratio (trailing)22.28x99
PE Ratio (forward)20.04x1112.1
Return on Assets9.42%1111
Return on Equity25.98%1414
10-Year Price Returns62.95%33
Revenue Growth112.40%1014
Earnings Growth91.89%914.4
Return on Invested Capital12.18%89.6
Payout Ratio58.79%66
EPS Estimates for Current and Next 4 Quarters6.67%45.2
Price-to-Free Cash Flow21.71x1111
Debt-to-Equity Ratio1.12x1

1

Looking at the table above, you can see that Coca-Cola has a solid history of revenue and earnings returns; however, has not seen very significant price returns over the past ten years when compared with the S&P 500. Even though the company remains a solid investment option, future earnings growth appear to be somewhat limited. Coca-Cola remains a very good defensive stock to have in one's portfolio.

Procter & Gamble

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases581412.6
Current Dividend Yield3.23%913.5
Dividend Growth157.40%69
PE Ratio (trailing)21.18x1010
PE Ratio (forward)18.99x1213.2
Return on Assets7.75%99
Return on Equity16.26%1111
10-Year Price Returns42.41%22
Revenue Growth64.76%79.8
Earnings Growth68.17%812.8
Return on Invested Capital10.60%67.2
Payout Ratio62.34%55
EPS Estimates for Current and Next 4 Quarters6.26%45.2
Price-to-Free Cash Flow24.04x1111
Debt-to-Equity Ratio0.46x8

8

Procter & Gamble is very similar to Coca-Cola in terms of historical revenue and earnings growth, along with limited future earnings growth. The company has a higher payout ratio than Coca-Cola, but a lower debt level. Procter & gamble provides a dividend yield over 3%, making it an attractive dividend growth investment.

Medtronic

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3643.6
Current Dividend Yield1.90%46
Dividend Growth264%1015
PE Ratio (trailing)21.33x1010
PE Ratio (forward)15.89x1314.3
Return on Assets8.45%1010
Return on Equity16.18%1111
10-Year Price Returns31.71%22
Revenue Growth81.51%912.6
Earnings Growth81.55%914.4
Return on Invested Capital10.02%67.2
Payout Ratio36.41%1010
EPS Estimates for Current and Next 4 Quarters4.10%33.9
Price-to-Free Cash Flow14.26x1313
Debt-to-Equity Ratio0.61x6

6

Medtronic offers a low dividend yield, but solid growth. The company maintains nice returns on assets and equity. Future earnings growth may be somewhat limited, but Medtronic should continue to see significant dividend growth with its low payout ratio.

Becton, Dickinson and Company

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4265.4
Current Dividend Yield1.84%46
Dividend Growth263.30%1015
PE Ratio (trailing)24.66x77
PE Ratio (forward)18.96x1213.2
Return on Assets7.96%99
Return on Equity19.20%1212
10-Year Price Returns123.80%55
Revenue Growth71.89%811.2
Earnings Growth121.50%1117.6
Return on Invested Capital10.61%67.2
Payout Ratio42.53%99
EPS Estimates for Current and Next 4 Quarters6.50%45.2
Price-to-Free Cash Flow16.25x1212
Debt-to-Equity Ratio0.79x4

4

Just as Procter & Gamble is similar to Coca-Cola, Becton, Dickinson & Company is similar to Medtronic in its low dividend yield, solid growth and solid returns on equity and assets. The company has a stable balance sheet and a payout ratio that should not limit its future dividend growth.

Kimberly Clark

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4265.4
Current Dividend Yield2.98%812
Dividend Growth110%46
PE Ratio (trailing)20.16x1111
PE Ratio (forward)18.38x1213.2
Return on Assets11.13%1212
Return on Equity46.19%1515
10-Year Price Returns73.02%33
Revenue Growth46.40%68.4
Earnings Growth57.78%711.2
Return on Invested Capital19.05%1315.6
Payout Ratio57.84%66
EPS Estimates for Current and Next 4 Quarters8.63%67.8
Price-to-Free Cash Flow22.45x1111
Debt-to-Equity Ratio1.19x1

1

Kimberly Clark has a high debt level and low stock price appreciation over the past ten years; however, the company offers an attractive dividend yield with solid growth. The stock is trading at a fair value and offers significant returns on assets, equity, and invested capital.

Pentair

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3843.6
Current Dividend Yield1.33%23
Dividend Growth127.30%57.5
PE Ratio (trailing)25.34x66
PE Ratio (forward)19.19x1213.2
Return on Assets5.14%55
Return on Equity10.01%66
10-Year Price Returns133.50%66
Revenue Growth469.20%1521
Earnings Growth61.23%711.2
Return on Invested Capital6.85%44.8
Payout Ratio32.50%1111
EPS Estimates for Current and Next 4 Quarters23.31%1519.5
Price-to-Free Cash Flow20.39x1111
Debt-to-Equity Ratio0.42x9

9

Pentair has seen very impressive revenue growth over the past ten years, but has seen only marginal growth in terms of earnings and stock price. However, the company's future EPS estimates look to be favorable. The company has an attractive balance sheet and payout ratio, that should lead to continued dividend growth.

Ecolab

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases2810.9
Current Dividend Yield1.01%23
Dividend Growth243.80%913.5
PE Ratio (trailing)33.51x33
PE Ratio (forward)26.00x66.6
Return on Assets5.22%55
Return on Equity14.63%1010
10-Year Price Returns259.00%1111
Revenue Growth246.30%1419.6
Earnings Growth185.90%1320.8
Return on Invested Capital7.18%44.8
Payout Ratio29.97%1212
EPS Estimates for Current and Next 4 Quarters17.73%1316.9
Price-to-Free Cash Flow36.67x88
Debt-to-Equity Ratio0.94x2

2

Ecolab has a dividend yield of just over 1%; however, it does offer significant growth in not only its dividend but also its revenue and earnings. With high estimated future EPS growth and a low payout ratio, Ecolab should continue to reward long term investors well into the future.

Clorox

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3743.6
Current Dividend Yield3.23%913.5
Dividend Growth174.10%69
PE Ratio (trailing)21.30x1010
PE Ratio (forward)21.18x1011
Return on Assets13.04%1414
Return on Equity485.50%1515
10-Year Price Returns71.65%33
Revenue Growth32.99%57
Earnings Growth68.10%812.8
Return on Invested Capital21.87%1416.8
Payout Ratio63.40%55
EPS Estimates for Current and Next 4 Quarters3.95%22.6
Price-to-Free Cash Flow21.25x1111
Debt-to-Equity Ratio16.25x1

1

Clorox is an overall solid company with an attractive dividend yield and solid growth in revenue, dividend, and earnings. The only issues with Clorox is that it does have a large amount of debt and its future earnings estimates are not that great. However, I do believe that long term investors will see positive returns going forward.

Target

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4687.2
Current Dividend Yield3.57%1116.5
Dividend Growth550%1522.5
PE Ratio (trailing)19.69x1212
PE Ratio (forward)15.65x1314.3
Return on Assets4.23%44
Return on Equity11.61%77
10-Year Price Returns29.23%22
Revenue Growth64.88%79.8
Earnings Growth1.08%11.6
Return on Invested Capital6.19%44.8
Payout Ratio55.34%66
EPS Estimates for Current and Next 4 Quarters18.84%1418.2
Price-to-Free Cash Flow53.5x66
Debt-to-Equity Ratio0.85x3

3

Target has one of the better dividend yields in this group of stocks as well as one of the best dividend growth over the past ten years. Target has had some recent problems related to data breaches, etc.; however, future earnings are estimated to be high and the stock appears to be currently fairly valued.

McGraw-Hill

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4165.4
Current Dividend Yield1.45%23
Dividend Growth100%46
PE Ratio (trailing)25.94x66
PE Ratio (forward)21.82x1011
Return on Assets14.65%1414
Return on Equity75.42%1515
10-Year Price Returns114.40%55
Revenue Growth-2.44%00
Earnings Growth79.02%812.8
Return on Invested Capital43.95%1518
Payout Ratio43.42%99
EPS Estimates for Current and Next 4 Quarters14.86%1215.6
Price-to-Free Cash Flow43.4x77
Debt-to-Equity Ratio0.61x6

6

McGraw-Hill is one of the few Aristocrats to have negative revenue growth over the past ten years. It also has low dividend growth combined with a low dividend yield. The company has been able to keep earnings growth respectable and future earnings estimates are stable, but revenue growth remains a valid concern.

McCormick

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases2810.9
Current Dividend Yield2.04%57.5
Dividend Growth164.30%69
PE Ratio (trailing)24.60x77
PE Ratio (forward)22.17x99.9
Return on Assets9.14%1111
Return on Equity21.60%1313
10-Year Price Returns109.80%55
Revenue Growth68.60%811.2
Earnings Growth94.82%914.4
Return on Invested Capital12.57%89.6
Payout Ratio46.58%88
EPS Estimates for Current and Next 4 Quarters9.25%79.1
Price-to-Free Cash Flow23.88x1111
Debt-to-Equity Ratio0.64x6

6

McCormick is overall a solid company. It's greatest strengths or its strong returns on assets, equity, and invested capital. The company's revenue, earnings, and dividend growth have not been overly impressive, but they have been stable and consistent.

Sysco

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4476.3
Current Dividend Yield3.09%913.5
Dividend Growth123.10%46
PE Ratio (trailing)23.11x88
PE Ratio (forward)20.96x1112.1
Return on Assets7.45%99
Return on Equity18.41%1212
10-Year Price Returns0.43%11
Revenue Growth56.23%79.8
Earnings Growth16.31%34.8
Return on Invested Capital11.67%78.4
Payout Ratio69.14%55
EPS Estimates for Current and Next 4 Quarters17.17%1316.9
Price-to-Free Cash Flow20.68x1111
Debt-to-Equity Ratio0.56x7

7

Sysco has underperformed the S&P 500 significantly over the past ten years, but the company does provide an attractive dividend yield with solid growth. Future earnings estimates are positive and with a stable balance sheet and payout ratio, Sysco should continue to reward long term shareholders.

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 Coca-Cola, Procter & Gamble, Ecolab, Target, and McCormick. As always, I suggest individual investors perform their own research before making any investment decisions.

The last article of this series, Part 5, will feature the "Lightweight" Dividend Aristocrat stocks (10 stocks that have weighted scores between 123.3 and 97.9).

Source: Dividend Aristocrats Ranking: Part 4, The Super Lightweights