Highest Yielding, Highest Momentum Dividend Champions

by: Scott's Investments

I frequently use DRIP Investing's US Dividend Champions list to identify potential high yield equities. My site tends to focus on price momentum strategies for picking ETFs and stocks. For those investors who want to combine active stock management and momentum/technical strategies with reliable dividend paying stocks, the US Dividend Champions list is a great place to start since it is a list of stocks with a history of raising dividends for at least 25 years.

Combining the Dividend Champions list with a basic price momentum strategy yields some potential portfolio candidates. I previously detailed a study showing that among the S&P 1500 the high yielding, highest price momentum stocks produce greater returns that lower yielding, lower price momentum stocks. Specifically, the study ranked the highest yielding stocks by 6 month price momentum, divided them into 5 segments, and found that highest yield stocks with the highest 6 month price momentum outperformed all other momentum segments (in other words, those high yield stocks with lower price momentum).

I am not aware of any similar studies which focus exclusively on the Dividend Champions list. However, if we apply the same high yield-high momentum strategy to Dividend Champions, we can identify stocks with the potential for capital appreciation which also sustain and grow dividend payments.

Starting with the US Dividend Champions list for January which contains 98 stocks, I screened for stocks on the list yielding at least 3% as of January 6th. There are 39 Dividend Champions yielding at least 3%. I then ranked these 39 stocks based on 6 month returns. The top 10 stocks based on 6 month returns as of January 6th are below. I have also listed payout ratios for each stock which can be an indicator of dividend sustainability; however, short-term earnings gyrations due to such things as one-time write offs may have a short-term impact on this ratio so the payout ratio is always worth additional research.

Last month's list is available here. This month's list has three new additions, RPM International (NYSE:RPM), United Bankshares (NASDAQ:UBSI), and Diebold (NYSE:DBD). The stocks dropping out of the top ten are Middlesex (NASDAQ:MSEX), Consolidated Edison (NYSE:ED), and Questar (NYSE:STR).

Yield, payout, performance and return data in the chart below obtained from Finviz:

Ticker Company Trend Dividend Yield Payout Ratio Performance (Half Year) 200-Day SMA
CTL CenturyLink, Inc. Trend 6.38% 91.58% 36.83% 23.41%
MSA Mine Safety Appliances Co. Trend 3.25% 90.99% 28.55% 14.31%
CTWS Connecticut Water Service Inc. Trend 3.44% 87.70% 26.11% 17.31%
GPC Genuine Parts Company Trend 3.22% 56.55% 25.97% 16.53%
CINF Cincinnati Financial Corp. Trend 4.98% 52.02% 21.76% 14.39%
RPM RPM International Inc. Trend 3.78% 61.46% 21.74% 13.06%
UBSI United Bankshares Inc. Trend 4.07% 75.05% 19.18% 13.02%
MO Altria Group Inc. Trend 6.18% 80.01% 19.03% 11.60%
DBD Diebold, Incorporated Trend 3.37% 65.80% 18.47% 7.10%
MGEE MGE Energy Inc. Trend 3.51% 57.84% 17.82% 12.93%
Click to enlarge

Disclosure: No positions