Dividend Aristocrats Ranking: Part 5, The Lightweights

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 |  Includes: APD, BMS, CAH, CINF, CTAS, ED, HCP, LEG, NUE, SWK
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 Dividend Aristocrat stocks that make up the 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)
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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 5, will focus on the next highest scoring set of stocks, the Lightweights, which include:

  • Cincinnati Financial (NASDAQ:CINF) - Total score of 123.3
  • HCP (NYSE:HCP) - Total score of 123.2
  • Nucor (NYSE:NUE) - Total score of 122.9
  • Cintas (NASDAQ:CTAS) - Total score of 119.1
  • Stanley Works (NYSE:SWK) - Total score of 118.1
  • Air Products (NYSE:APD) - Total score of 113.9
  • Consolidated Edison (NYSE:ED) - Total score of 110.3
  • Leggett & Platt (NYSE:LEG) - Total score of 108.7
  • Bemis (NYSE:BMS) - Total score of 108.2
  • Cardinal Health (NYSE:CAH) - Total score of 97.9

Cincinnati Financial

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 54 12 10.8
Current Dividend Yield 3.61% 11 16.5
Dividend Growth 68.00% 2 3
PE Ratio (trailing) 17.82x 12 12
PE Ratio (forward) 21.87x 10 11
Return on Assets 2.61% 2 2
Return on Equity 7.68% 3 3
10-Year Price Returns 20.09% 1 1
Revenue Growth 33.13% 5 7
Earnings Growth -7.90% 0 0
Return on Invested Capital 6.63% 4 4.8
Payout Ratio 58.37% 6 6
EPS Estimates for Current and Next 4 Quarters 18.28% 14 18.2
Price-to-Free Cash Flow 9.30x 14 14
Debt-to-Equity Ratio 0.16x 14

14

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Cincinnati Financial has an attractive dividend yield and low debt; however, the company has low revenue growth and earnings growth that has been negative over the past ten years. In addition, the company has fairly low returns on assets, equity, and invested capital.

HCP

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 29 2 1.8
Current Dividend Yield 5.29% 15 22.5
Dividend Growth 30.54% 1 1.5
PE Ratio (trailing) 18.88x 12 12
PE Ratio (forward) 13.64x 14 15.4
Return on Assets 5.02% 5 5
Return on Equity 9.37% 5 5
10-Year Price Returns 68.84% 3 3
Revenue Growth 698.30% 15 21
Earnings Growth 77.68% 8 12.8
Return on Invested Capital 5.13% 3 3.6
Payout Ratio 98.69% 2 2
EPS Estimates for Current and Next 4 Quarters 3.87% 2 2.6
Price-to-Free Cash Flow 19.84x 12 12
Debt-to-Equity Ratio 0.81x 3

3

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HCP has a high dividend yield and nice revenue growth. Its payout ratio is high, which might limit future dividend growth. HCP also has fairly high debt and low future earnings estimates.

Nucor

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 41 6 5.4
Current Dividend Yield 2.96% 8 12
Dividend Growth 604.80% 15 22.5
PE Ratio (trailing) 30.94x 4 4
PE Ratio (forward) 20.63x 11 12.1
Return on Assets 3.51% 3 3
Return on Equity 6.77% 3 3
10-Year Price Returns 167.30% 7 7
Revenue Growth 135.90% 11 15.4
Earnings Growth 27.09% 4 6.4
Return on Invested Capital 4.32% 3 3.6
Payout Ratio 104.80% 1 1
EPS Estimates for Current and Next 4 Quarters 127% 15 19.5
Price-to-Free Cash Flow 291.26x 1 1
Debt-to-Equity Ratio 0.58x 15

19.5

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Nucor has a nice dividend yield and excellent dividend growth. The company has a high payout ratio, which may limit future growth. Nucor appears somewhat overvalued but has great future earnings estimates.

Cintas

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 31 2 1.8
Current Dividend Yield 1.20% 2 3
Dividend Growth 140.60% 5 7.5
PE Ratio (trailing) 23.60x 8 8
PE Ratio (forward) 23.06x 8 8.8
Return on Assets 7.70% 9 9
Return on Equity 15.26% 10 10
10-Year Price Returns 42.54% 2 2
Revenue Growth 56.93% 7 9.8
Earnings Growth 71.33% 8 12.8
Return on Invested Capital 9.55% 5 6
Payout Ratio 28% 12 12
EPS Estimates for Current and Next 4 Quarters 10.71% 8 10.4
Price-to-Free Cash Flow 19.01x 12 12
Debt-to-Equity Ratio 0.60x 6

6

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Cintas has a fairly low dividend and its dividend growth hasn't been that impressive either. The company's revenue/earnings growth has been solid and with a low payout ratio and stable debt levels, Cintas should continue to provide slow growing returns to long term shareholders.

Stanley Works

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 46 8 7.2
Current Dividend Yield 2.27% 6 9
Dividend Growth 78.57% 3 4.5
PE Ratio (trailing) 24.58x 7 7
PE Ratio (forward) 16.26x 13 14.3
Return on Assets 3.40% 3 3
Return on Equity 8.42% 4 4
10-Year Price Returns 99.80% 4 4
Revenue Growth 315.50% 15 21
Earnings Growth 3.39% 1 1.6
Return on Invested Capital 5% 3 3.6
Payout Ratio 55.05% 6 6
EPS Estimates for Current and Next 4 Quarters 17.04% 13 16.9
Price-to-Free Cash Flow 27.15x 10 10
Debt-to-Equity Ratio 0.62x 6

6

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Stanley Works provides a decent dividend yield with steady growth. The company's revenue growth has been excellent; however, that hasn't translated into much earnings growth. The company does have nice future earnings estimates and is fairly priced.

Air Products

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 32 2 1.8
Current Dividend Yield 2.35% 6 9
Dividend Growth 165.50% 6 9
PE Ratio (trailing) 27.98x 5 5
PE Ratio (forward) 22.78x 9 9.9
Return on Assets 5.65% 6 6
Return on Equity 14.45% 10 10
10-Year Price Returns 160.40% 7 7
Revenue Growth 45.01% 6 8.4
Earnings Growth 86.14% 9 14.4
Return on Invested Capital 7.56% 4 4.8
Payout Ratio 59.74% 6 6
EPS Estimates for Current and Next 4 Quarters 15.09% 12 15.6
Price-to-Free Cash Flow 77.48x 4 4
Debt-to-Equity Ratio 0.89x 3

3

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Air Products doesn't have any extremely impressive growth or returns, but the company is solid overall in terms of historical revenue, earnings, and dividend growth. The company does have a fairly high debt level and appears slightly overvalued.

Consolidated Edison

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 40 5 4.5
Current Dividend Yield 4.44% 13 19.5
Dividend Growth 11.50% 1 1.5
PE Ratio (trailing) 13.53x 14 14
PE Ratio (forward) 15.13x 13 14.3
Return on Assets 2.98% 2 2
Return on Equity 10.16% 6 6
10-Year Price Returns 42.17% 2 2
Revenue Growth 30.84% 5 7
Earnings Growth 70.87% 8 12.8
Return on Invested Capital 5.04% 3 3.6
Payout Ratio 58.90% 6 6
EPS Estimates for Current and Next 4 Quarters 9.62% 7 9.1
Price-to-Free Cash Flow 42.61x 7 7
Debt-to-Equity Ratio 1.02x 1

1

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Consolidated Edison has a high dividend yield, but slow growth. Stock appreciation has been slow going as well, but the company is a strong candidate as an income investment considering its stable payout ratio.

Leggett & Platt

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 42 6 5.4
Current Dividend Yield 3.52% 11 16.5
Dividend Growth 100% 4 6
PE Ratio (trailing) 24.71x 7 7
PE Ratio (forward) 19.57x 12 13.2
Return on Assets 6.16% 7 7
Return on Equity 14.24% 10 10
10-Year Price Returns 27.76% 2 2
Revenue Growth -21.60% 0 0
Earnings Growth 9.04% 1 1.6
Return on Invested Capital 8.35% 5 6
Payout Ratio 82.91% 3 3
EPS Estimates for Current and Next 4 Quarters 12.77% 10 13
Price-to-Free Cash Flow 16.76x 12 12
Debt-to-Equity Ratio 0.63x 6

6

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Leggett & Platt has an attractive dividend yield, but negative revenue growth over the past ten years and very low earnings growth.

Bemis

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 31 2 1.8
Current Dividend Yield 2.63% 7 10.5
Dividend Growth 68.75% 2 3
PE Ratio (trailing) 20.05x 11 11
PE Ratio (forward) 16.66x 13 14.3
Return on Assets 5.08% 5 5
Return on Equity 12.84% 8 8
10-Year Price Returns 48.16% 2 2
Revenue Growth 84.07% 9 12.6
Earnings Growth 35.51% 5 8
Return on Invested Capital 6.80% 4 4.8
Payout Ratio 50.73% 7 7
EPS Estimates for Current and Next 4 Quarters 6.08% 4 5.2
Price-to-Free Cash Flow 18.41x 12 12
Debt-to-Equity Ratio 0.85x 3

3

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Bemis is currently attractively priced, but the company offers a low dividend yield and low dividend growth along with poor stock price appreciation over the past ten years compared to the market in general.

Cardinal Health

Value Metric Score Weighted Metric Score
Number Of Consecutive Years With Dividend Increases 25 1 0.9
Current Dividend Yield 1.98% 4 6
Dividend Growth 1.04K% 15 22.5
PE Ratio (trailing) 70.21x 1 1
PE Ratio (forward) 18.09x 12 13.2
Return on Assets 1.37% 1 1
Return on Equity 5.37% 2 2
10-Year Price Returns 40.39% 2 2
Revenue Growth 45.08% 6 8.4
Earnings Growth -71.10% 0 0
Return on Invested Capital 3.33% 2 2.4
Payout Ratio 117.60% 1 1
EPS Estimates for Current and Next 4 Quarters 21.57% 15 19.5
Price-to-Free Cash Flow 12.67x 13 13
Debt-to-Equity Ratio 0.65x 5

5

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Cardinal Health has seen extremely impressive dividend growth over the past ten years and a fairly attractive price. However, the company has seen a strong drop in earnings over the past ten years and fairly low revenue growth. The company's high payout ratio may limit future dividend 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.

Even though this group of stocks are the lowest scoring Dividend Aristocrats, I believe there are still good long term investment opportunities available in these stocks. I'm not going to recommend any individual stocks from this group, as I feel that stocks from the prior articles of this series provide greater potential future returns, but I don't think investors should flat-out ignore these stocks. Some of them provide high dividend yields for investors looking for income, and some are currently priced attractively for investors looking for value.

As always, I suggest individual investors perform their own research before making any investment decisions.

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.