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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 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)

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases541210.8
Current Dividend Yield3.61%1116.5
Dividend Growth68.00%23
PE Ratio (trailing)17.82x1212
PE Ratio (forward)21.87x1011
Return on Assets2.61%22
Return on Equity7.68%33
10-Year Price Returns20.09%11
Revenue Growth33.13%57
Earnings Growth-7.90%00
Return on Invested Capital6.63%44.8
Payout Ratio58.37%66
EPS Estimates for Current and Next 4 Quarters18.28%1418.2
Price-to-Free Cash Flow9.30x1414
Debt-to-Equity Ratio0.16x14

14

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases2921.8
Current Dividend Yield5.29%1522.5
Dividend Growth30.54%11.5
PE Ratio (trailing)18.88x1212
PE Ratio (forward)13.64x1415.4
Return on Assets5.02%55
Return on Equity9.37%55
10-Year Price Returns68.84%33
Revenue Growth698.30%1521
Earnings Growth77.68%812.8
Return on Invested Capital5.13%33.6
Payout Ratio98.69%22
EPS Estimates for Current and Next 4 Quarters3.87%22.6
Price-to-Free Cash Flow19.84x1212
Debt-to-Equity Ratio0.81x3

3

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4165.4
Current Dividend Yield2.96%812
Dividend Growth604.80%1522.5
PE Ratio (trailing)30.94x44
PE Ratio (forward)20.63x1112.1
Return on Assets3.51%33
Return on Equity6.77%33
10-Year Price Returns167.30%77
Revenue Growth135.90%1115.4
Earnings Growth27.09%46.4
Return on Invested Capital4.32%33.6
Payout Ratio104.80%11
EPS Estimates for Current and Next 4 Quarters127%1519.5
Price-to-Free Cash Flow291.26x11
Debt-to-Equity Ratio0.58x15

19.5

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3121.8
Current Dividend Yield1.20%23
Dividend Growth140.60%57.5
PE Ratio (trailing)23.60x88
PE Ratio (forward)23.06x88.8
Return on Assets7.70%99
Return on Equity15.26%1010
10-Year Price Returns42.54%22
Revenue Growth56.93%79.8
Earnings Growth71.33%812.8
Return on Invested Capital9.55%56
Payout Ratio28%1212
EPS Estimates for Current and Next 4 Quarters10.71%810.4
Price-to-Free Cash Flow19.01x1212
Debt-to-Equity Ratio0.60x6

6

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4687.2
Current Dividend Yield2.27%69
Dividend Growth78.57%34.5
PE Ratio (trailing)24.58x77
PE Ratio (forward)16.26x1314.3
Return on Assets3.40%33
Return on Equity8.42%44
10-Year Price Returns99.80%44
Revenue Growth315.50%1521
Earnings Growth3.39%11.6
Return on Invested Capital5%33.6
Payout Ratio55.05%66
EPS Estimates for Current and Next 4 Quarters17.04%1316.9
Price-to-Free Cash Flow27.15x1010
Debt-to-Equity Ratio0.62x6

6

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3221.8
Current Dividend Yield2.35%69
Dividend Growth165.50%69
PE Ratio (trailing)27.98x55
PE Ratio (forward)22.78x99.9
Return on Assets5.65%66
Return on Equity14.45%1010
10-Year Price Returns160.40%77
Revenue Growth45.01%68.4
Earnings Growth86.14%914.4
Return on Invested Capital7.56%44.8
Payout Ratio59.74%66
EPS Estimates for Current and Next 4 Quarters15.09%1215.6
Price-to-Free Cash Flow77.48x44
Debt-to-Equity Ratio0.89x3

3

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4054.5
Current Dividend Yield4.44%1319.5
Dividend Growth11.50%11.5
PE Ratio (trailing)13.53x1414
PE Ratio (forward)15.13x1314.3
Return on Assets2.98%22
Return on Equity10.16%66
10-Year Price Returns42.17%22
Revenue Growth30.84%57
Earnings Growth70.87%812.8
Return on Invested Capital5.04%33.6
Payout Ratio58.90%66
EPS Estimates for Current and Next 4 Quarters9.62%79.1
Price-to-Free Cash Flow42.61x77
Debt-to-Equity Ratio1.02x1

1

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases4265.4
Current Dividend Yield3.52%1116.5
Dividend Growth100%46
PE Ratio (trailing)24.71x77
PE Ratio (forward)19.57x1213.2
Return on Assets6.16%77
Return on Equity14.24%1010
10-Year Price Returns27.76%22
Revenue Growth-21.60%00
Earnings Growth9.04%11.6
Return on Invested Capital8.35%56
Payout Ratio82.91%33
EPS Estimates for Current and Next 4 Quarters12.77%1013
Price-to-Free Cash Flow16.76x1212
Debt-to-Equity Ratio0.63x6

6

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

Bemis

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases3121.8
Current Dividend Yield2.63%710.5
Dividend Growth68.75%23
PE Ratio (trailing)20.05x1111
PE Ratio (forward)16.66x1314.3
Return on Assets5.08%55
Return on Equity12.84%88
10-Year Price Returns48.16%22
Revenue Growth84.07%912.6
Earnings Growth35.51%58
Return on Invested Capital6.80%44.8
Payout Ratio50.73%77
EPS Estimates for Current and Next 4 Quarters6.08%45.2
Price-to-Free Cash Flow18.41x1212
Debt-to-Equity Ratio0.85x3

3

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

ValueMetric ScoreWeighted Metric Score
Number Of Consecutive Years With Dividend Increases2510.9
Current Dividend Yield1.98%46
Dividend Growth1.04K%1522.5
PE Ratio (trailing)70.21x11
PE Ratio (forward)18.09x1213.2
Return on Assets1.37%11
Return on Equity5.37%22
10-Year Price Returns40.39%22
Revenue Growth45.08%68.4
Earnings Growth-71.10%00
Return on Invested Capital3.33%22.4
Payout Ratio117.60%11
EPS Estimates for Current and Next 4 Quarters21.57%1519.5
Price-to-Free Cash Flow12.67x1313
Debt-to-Equity Ratio0.65x5

5

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.

Source: Dividend Aristocrats Ranking: Part 5, The Lightweights