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Summary

  • David Fish's Dividend Champions, Contenders and Challengers are a good universe to consider.
  • Mine that universe using filter criteria that identify strengths that are important to you.
  • Add balance sheet strength and credit worthiness to your review.
  • Consider short-term technical factors deciding when to buy each stock.
  • Go beyond quantitative review to understand each company qualitatively before you buy.

You may find something of interest for yourself in this group of filtered dividend stocks.

We quantitatively filtered through David Fish's Dividend Champions, Contenders, and Challengers list ("CCC list") of 543 stocks that have paid and increased dividends for at least 5 years (some for several decades) to find those that may be currently most attractive.

Only 9 (less than 2%) passed our filters.

Here are the stocks, and then how we got them:

Baxter International Inc BAX Medical Instruments & Supplies
CMS Energy Corp CMS Utilities - Regulated Electric
DTE Energy Holding Co DTE Utilities - Regulated Electric
Energy Transfer Equity LP ETE Oil & Gas Midstream
Genuine Parts Co GPC Specialty Retail
Microchip Technology Inc MCHP Semiconductors
ONEOK Partners LP OKS Oil & Gas Midstream
Simon Property Group Inc SPG REIT - Retail
Western Gas Partners, LP WES Oil & Gas Midstream

Prior to this review, we owned BAX, GPC, OKS and ETE. We don't expect to invest in the others at this time. We find utilities as a category to be overvalued.

We used three different database tools to do the filter.

Filter Level 1 (258 of 543 of CCC stocks passed level 1):

[used yesterday's end-of-day data]

  • minimum dollar volume per minute $25,000
  • price above 200-day simple moving average
  • linear regression slope of 200-day average positive
  • current 200-day average above level 10 days ago
  • price less than 2 (63-day) standard deviations above 200-day average

Filter Level 2 (showing successive reduction of the 258):

[used today's end-of -day data]

  • Yield >= 2.5% (100 passed)
  • Consensus target price >= 1.05 times price (42 passed)
  • PEG ratio <3x (24 passed)
  • 50-day average > 200-day average (15 passed)

Filter Level 3 (showing successive reduction of the 15):

[used today's end-of-day data]

  • 1-yr revenue growth rate >zero
  • 3-yr revenue growth rate > zero
  • 5-yr dividend growth rate >= 3%

Then we checked with the Wright's ratings for Liquidity, Financial Strength, Profitability and Growth [explanation of rating scale here] and the Moody's credit rating.

These are important types of data for dividend investors seeking long-term holdings.

We'd like to see investment grade for dividend stocks. For Wright's we would like to see BBB4 or better, and Baa or better from Moody's.

Wright's Moody's
BAX ABA10 A3
CMS ACB7 Baa2
DTE ABC2 A3
ETE ADNN Ba2
GPC AAB10 n/a
MCHP AAB4 n/a
OKS ABB5 Baa2
SPG ADA5 A3
WES BBC7 Baa3

Next we looked up the year ahead rating for price behavior as rendered by ThomsonReuters StarMine through Fidelity (where over 7 is Bullish and 3 or less is Bearish). We don't put great stock these ratings, but it does feel moderately soothing to know if analysts look favorably.

StarMine
BAX 8.5
CMS 9.1
DTE 6.8
ETE 4.7
GPC 5.8
MCHP 8.7
OKS 4.2
SPG 3.8
WES 0.8

The we looked up the short-term technical rating of the 9 stocks as rendered by BarChart.com and StockCharts.com. The BarChart data is self-evident in its meaning. The StockCharts data is strong technically at 70 and above, and weak at 30 and below.

Technical ratings can be useful when deciding when to enter a position.

BarChart StockCharts
BAX 88% BUY 59.9
CMS 8% BUY 61.9
DTE 8% SELL 60.9
ETE 56% BUY n/a
GPC 80% BUY 51.6
MCHP 88% BUY 63.4
OKS 24% BUY 63.4
SPG 16% BUY 70.0
WES 32% BUY 86.0

Here is how those 9 stocks did versus the S&P 500 over the trailing 1 year:

If any of these stocks has tentative attraction for you, make sure you go well beyond this data to read their annual and quarterly reports, study their financials, understand what they do and where they stand thematically and competitively. Know what you own and why you own it.

Disclosure: QVM has positions in BAC, GPC, ETE and OKS as of the creation date of this article (July 8, 2014). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, and are not compensated by Seeking Alpha in any way relating to this article.

General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.

Source: 9 Filtered Dividend Stocks From Dividend Champions, Contenders And Challengers