Ranking the 2011 Dividend Aristocrats

 |  Includes: AFL, CB, DOV, GDO, LEG, LOW, MHFI, TGT, WBA, XOM
by: Scott's Investments

Standard and Poors recently announced its 2011 Dividend Aristocrats. The S&P 500 Dividend Aristocrats Index is designed to measure the performance of S&P 500 constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 25 years.

The deletions from the 2010 list are:




The additions are:




I have the full list available on the right hand side of Scott's Investments along with the dividend yield for each stock. Using a simple stock ranking system, I have rated each dividend aristocrat based on a 1/3 weighting for yield, 1/3 weighting for payout ratio and 1/3 weighting for projected annual earnings per share [EPS] growth for the next 5 years. For those interested in how create their own stock ranking system I provide detailed instructions in this article (all that is required is a spreadsheet and a free data source such as Finviz).

There are an almost infinite number of ways to rank stocks; however, for dividend investors, yield, EPS growth, and payout ratio are three critical metrics. I ranked each Aristocrat in order of yield (highest to lowest), 5 year estimated EPS growth (highest to lowest) and then ranked each Aristocrat in order of payout ratio (lowest to highest) and averaged these rankings to create an overall rank.

It is important to note that raw data is but one tool to use in your overall analysis. For example, payout ratios can fluctuate since they are calculated by dividing dividends per share by earnings per share. A short-term dip in earnings could inflate the current payout ratio of a stock. Thus, it is important to evaluate not only the current payout ratio of a stock but also whether a companies future earnings growth will continue to fund dividend payouts (and thereby potentially lowering the payout ratio in the future). In addition, estimated 5 year EPS growth is only that, an estimate provided by analysts. The reality is that the next 5 years will provide both earnings surprises and disappointments for most of the companies on the list.

The following is the result when averaging the ranking of current yield, projected 5 year EPS growth, and current payout ratio among the 2011 Dividend Aristocrats. The stocks are listed in order of their ranking.

Data source: Finviz

Ticker Company Sector Retirement Portfolios Dividend Yield Payout Ratio EPS growth next 5 years
AFL AFLAC Inc. Financial Here 2.11% 24.65% 12.28%
WAG Walgreen Co. Services Here 1.80% 27.28% 13.56%
DOV Dover Corp. Industrial Goods Here 1.88% 31.86% 16.97%
FDO Family Dollar Stores Inc. Services Here 1.25% 22.48% 14.13%
LOW Lowe's Companies Inc. Services Here 1.73% 29.87% 14.72%
LEG Leggett & Platt, Incorporated Consumer Goods Here 4.67% 83.00% 13.75%
TGT Target Corp. Services Here 1.67% 21.62% 13.15%
XOM Exxon Mobil Corp. Basic Materials Here 2.41% 30.37% 10.55%
CB The Chubb Corporation Financial Here 2.47% 20.73% 8.38%
MHP The McGraw-Hill Companies, Inc. Services Here 2.59% 34.45% 10.70%
MMM 3M Co. Conglomerates Here 2.41% 36.29% 11.94%
WMT Wal-Mart Stores Inc. Services Here 2.26% 28.97% 10.15%
BCR CR Bard Inc. Healthcare Here 0.77% 13.75% 11.72%
EMR Emerson Electric Co. Industrial Goods Here 2.41% 51.01% 14.04%
ECL Ecolab Inc. Consumer Goods Here 1.39% 28.18% 13.23%
CINF Cincinnati Financial Corp. Financial Here 4.99% 52.02% 10.00%
MCD McDonald's Corp. Services Here 3.19% 47.91% 10.05%
GWW W.W. Grainger, Inc. Services Here 1.56% 30.62% 13.65%
VFC V.F. Corporation Consumer Goods Here 2.91% 44.82% 10.04%
BDX Becton, Dickinson and Company Healthcare Here 1.95% 29.28% 10.04%
ADP Automatic Data Processing, Inc. Technology Here 3.09% 56.26% 10.23%
CTAS Cintas Corporation Services Here 1.76% 33.00% 10.72%
ADM Archer Daniels Midland Company Consumer Goods Here 1.99% 21.25% 7.80%
STR Questar Corporation Basic Materials Here 3.22% 33.36% 5.40%
PEP Pepsico, Inc. Consumer Goods Here 2.93% 46.57% 9.28%
ABT Abbott Laboratories Healthcare Here 3.71% 56.29% 9.70%
SHW Sherwin-Williams Co. Services Here 1.71% 34.69% 11.65%
CLX Clorox Corporation Conglomerates Here 3.45% 55.81% 9.17%
JNJ Johnson & Johnson Healthcare Here 3.49% 41.71% 6.27%
SIAL Sigma-Aldrich Corporation Basic Materials Here 0.96% 19.81% 9.00%
PG Procter & Gamble Co. Consumer Goods Here 2.98% 48.74% 8.61%
HRL Hormel Foods Corp. Consumer Goods Here 1.98% 28.27% 8.30%
APD Air Products & Chemicals Inc. Basic Materials Here 2.16% 39.69% 9.28%
BF-B Brown-Forman Corporation Consumer Goods Here 1.70% 40.00% 10.85%
SWK Stanley Black & Decker, Inc. Industrial Goods Here 2.02% 141.43% 14.00%
KMB Kimberly-Clark Corporation Consumer Goods Here 4.18% 57.84% 7.63%
MKC McCormick & Co. Inc. Consumer Goods Here 2.39% 39.16% 7.67%
KO The Coca-Cola Company Consumer Goods Here 2.70% 52.67% 8.33%
BMS Bemis Company, Inc. Consumer Goods Here 2.78% 59.40% 8.68%
ED Consolidated Edison Inc. Utilities Here 4.79% 69.30% 4.38%
CTL CenturyLink, Inc. Technology Here 6.25% 91.58% 1.46%
PBI Pitney Bowes Inc. Consumer Goods Here 5.94% 85.93% -4.00%
PPG PPG Industries Inc. Conglomerates Here 2.65% 51.13% 7.50%
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Disclosure: no position