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In previous installments of the Smackdown series, I screened the Dividend Champions list of companies that have paid higher dividends for at least 25 straight years (which can be found here) using factors such as yield, payout ratio, and dividend growth rates (which was the focus of Smackdown VIII).

I generally only do one Smackdown each month, shortly after updating the Dividend Champions spreadsheet, but I was intrigued by some of the recent comments on articles by myself and other authors to the effect that we always seem to come up with the same companies, as deserving as they may be. Some people also mentioned a desire to consider both small cap and mid cap companies, which makes sense, from the perspective of gaining some additional diversification. Although definitions vary small caps are generally described as having a market capitalization (stock price times shares outstanding) between $100 million and $2 billion, whereas mid caps range in size from $2 billion to $10 billion in market capitalization. Since I had just reformatted the market cap column to be sortable, I decided to run a dual Smackdown and screened as follows:

Step 1: Sort the companies by market cap (column AC), from low to high. This produced groups of 22 small caps and 35 mid caps, once I eliminated four companies that had not increased their dividend in more than a year.

Step 2: Sort those companies by yield. I didn't want to select companies that had excessively low payouts, but younger investors may have time to start fairly low and enjoy many years of dividend increases, so eliminating only yields below 2% cut the list to 17 small caps and 21 mid caps.

Step 3: Sort those companies by latest percentage increase, high to low. I wanted to eliminate those whose boards of directors had been excessively stingy. Dropping companies with most recent increases of less than 2% cut the field to 11 small caps and 16 mid caps.

Step 4: Compare the remaining companies by the percentage increase of next year's EPS estimate over this year's EPS estimate. (Now column AB in the spreadsheet.) I wanted to make sure that earnings growth was expected to be healthy enough to support future dividend increases. I eliminated companies whose earnings are expected to decrease next year and those that had no estimates. That cut four small caps, but no mid caps.

Step 5: Compare the candidates by their 1-, 3-, 5-, and 10-year dividend growth rates (columns AJ to AM). I eliminated any company that had a DGR of less than 3% in any of these periods. The list of remaining candidates follows:

(Note that I've sorted all tables back into alphabetical order.)

No.

12/31

%

NY%

MCap

DGR

Company

Symbol

Yrs

Price

Yield

Inc.

Growth

($Mil)

1-yr

3-yr

5-yr

10-yr

Small Caps:

ABM Industries Inc.

ABM

44

26.30

2.13

3.70

16.78

1,380

3.8

4.0

5.2

5.7

Lancaster Colony Corp.

LANC

48

57.20

2.31

10.00

8.79

1,590

6.5

4.1

4.0

6.6

Mine Safety Appliances

MSA

39

31.13

3.21

4.17

38.60

1,130

3.1

5.6

13.7

20.2

Northwest Natural Gas

NWN

55

46.47

3.74

4.82

2.93

1,240

5.0

5.3

4.9

3.1

SJW Corp.

SJW

43

26.47

2.57

3.03

8.16

490

3.0

4.0

4.9

5.2

Mid Caps:

Clorox Company

CLX

33

63.28

3.48

10.00

10.84

8,820

9.4

11.4

13.4

9.9

Diebold Inc.

DBD

57

32.05

3.37

3.85

0.97

2,110

3.8

4.7

5.7

5.7

Eaton Vance Corp.

EV

30

30.23

2.38

12.50

17.93

3,580

5.6

9.0

14.2

20.6

Leggett & Platt Inc.

LEG

39

22.76

4.75

3.85

14.53

3,330

4.0

14.5

11.1

10.1

McCormick & Co.

MKC

25

46.53

2.41

7.69

7.66

6,190

8.3

9.1

10.2

10.6

National Fuel Gas

NFG

40

65.62

2.10

2.99

13.96

5,390

3.0

3.7

3.6

3.7

Pentair Inc.

PNR

35

36.51

2.19

5.26

17.26

3,610

5.6

8.2

7.9

8.9

Piedmont Natural Gas

PNY

32

27.96

4.01

3.70

4.40

2,020

3.7

3.9

4.2

4.4

Questar Corp.

STR

31

17.41

3.22

7.69

3.70

3,070

6.9

3.6

3.9

4.7

Valspar Corp.

VAL

30

34.48

2.09

12.50

12.89

3,370

6.7

7.2

9.9

9.4

Conclusion

Although the results included a couple of the “same old names,” all of these companies have attractive properties, such as strong dividend (and earnings) growth, and the results offer a widely diverse group of stocks worthy of further study for possible purchase.

Bonus Smackdown: The Contenders and the Challengers

I performed the same steps on the Dividend Contenders (increases of 10-24 years) and the Challengers (5-9 years) and the “winners” were:

Contenders:

No.

12/31

%

NY%

MCap

DGR

Company

Symbol

Yrs

Price

Yield

Inc.

Growth

($Mil)

1-yr

3-yr

5-yr

10-yr

Small Caps:

Arrow Financial Corp.

AROW

17

27.51

3.64

3.00

1.09

309

3.0

3.4

3.7

7.2

Atlantic Tele Network Inc.

ATNI

13

38.37

2.29

10.00

7.31

590

10.8

12.2

12.8

11.7

Community Bank System

CBU

17

27.77

3.46

9.09

4.76

920

4.5

4.3

4.7

6.1

Harleysville Group

HGIC

24

36.74

3.92

10.77

30.33

990

9.6

15.9

14.7

9.6

McGrath Rentcorp

MGRC

18

26.22

3.43

2.27

11.76

628

4.1

8.5

11.0

12.7

Meridian Bioscience Inc.

VIVO

19

23.16

3.28

11.76

16.46

942

11.8

20.6

28.9

21.7

National Bankshares

NKSH

11

31.49

2.99

6.82

0.88

218

8.3

6.2

5.1

7.9

New Jersey Resources

NJR

16

43.11

3.34

5.88

4.55

1,770

9.7

10.3

8.4

5.9

Owens & Minor Inc.

OMI

13

29.43

2.41

15.43

6.25

1,860

15.2

16.0

15.3

15.7

Republic Bancorp KY

RBCAA

12

23.75

2.41

8.33

1.61

497

8.5

9.8

12.9

16.3

South Jersey Industries

SJI

12

52.82

2.76

10.61

14.23

1,570

13.9

11.4

9.8

6.4

Tompkins Financial Corp.

TMP

24

39.16

3.47

10.00

5.92

426

7.5

5.6

6.5

6.1

Mid Caps:

Aqua America Inc.

WTR

19

22.48

2.76

6.90

7.78

3,090

7.3

7.1

8.1

7.7

Corporate Office Properties Trust

OFC

13

34.95

4.72

5.10

34.78

2,080

5.3

7.8

9.0

7.5

Cullen/Frost Bankers

CFR

17

61.12

2.95

4.65

5.81

3,720

4.1

4.9

8.8

8.9

Graco Inc.

GGG

14

39.45

2.13

5.00

20.12

2,360

5.3

6.6

9.0

17.0

Harsco Corp.

HSC

16

28.32

2.90

2.50

56.98

2,280

3.1

4.9

6.4

5.7

HCC Insurance Holdings

HCC

14

28.94

2.00

7.41

4.21

3,340

7.8

10.3

15.9

14.7

J.M. Smucker Co.

SJM

11

65.65

2.44

14.29

6.65

7,820

13.1

9.5

7.9

25.5

Linear Technology Corp.

LLTC

18

34.59

2.66

4.55

8.40

7,800

4.5

8.5

18.1

23.7

Northeast Utilities

NU

12

31.88

3.22

7.89

7.66

5,620

7.9

9.8

8.7

9.9

PartnerRe Limited

PRE

17

80.35

2.74

10.00

31.38

5,990

9.0

6.0

6.2

7.0

UGI Corp.

UGI

23

31.58

3.17

25.00

8.05

3,490

14.6

7.6

6.7

5.9

Challengers:

No.

12/31

%

NY%

MCap

DGR

Company

Symbol

Yrs

Price

Yield

Inc.

Growth

($Mil)

1-yr

3-yr

5-yr

10-yr

Small Caps:

Alliance Financial Corp.

ALNC

5

32.35

3.71

7.14

5.98

152

7.5

9.0

6.3

5.3

Avista Corp.

AVA

8

22.52

4.44

19.05

7.27

1,270

23.5

18.9

12.9

7.6

Bob Evans Farms

BOBE

5

32.96

2.43

11.11

8.11

996

15.2

10.7

9.6

7.8

Donegal Group Inc. A

DGICA

8

14.48

3.18

2.22

110.00

370

3.4

9.1

9.4

n/a

Healthcare Services Group Inc.

HCSG

8

16.27

3.82

5.90

18.87

1,070

21.1

28.7

37.2

n/a

Sensient Technologies Corp.

SXT

5

36.73

2.18

5.26

8.37

1,830

3.9

5.1

5.7

4.0

MidCaps:

Alliance Holdings GP LP

AHGP

5

48.13

4.16

3.63

13.64

2,880

12.8

22.6

n/a

n/a

Alliance Resource Partners LP

ARLP

8

65.76

5.05

2.47

8.10

2,410

8.6

13.4

15.3

12.4

Crane Company

CR

6

41.07

2.24

15.00

10.51

2,400

7.5

9.2

13.8

8.0

Darden Restaurants

DRI

6

46.44

2.76

28.00

13.47

6,430

26.7

24.6

36.6

35.8

Digital Realty Trust

DLR

6

51.54

4.11

10.42

16.72

4,610

43.7

19.2

16.9

n/a

Flowers Foods

FLO

9

26.91

2.97

14.29

8.44

2,460

14.8

23.0

24.8

22.1

Greif Inc. A

GEF

7

61.90

2.71

10.53

11.79

2,920

5.3

20.3

32.0

19.9

Hanover Insurance Group (The)

THG

6

46.72

2.14

33.33

46.79

2,110

33.3

35.7

32.0

14.9

Harris Corp.

HRS

9

45.30

2.21

13.64

0.41

5,810

11.9

21.8

27.4

25.1

Hasbro Inc.

HAS

7

47.18

2.12

25.00

19.33

6,430

18.8

16.6

23.5

14.7

ITC Holdings Corp.

ITC

6

61.98

2.16

4.69

19.64

3,140

4.8

5.1

20.1

n/a

L-3 Communications Holdings Inc.

LLL

7

70.49

2.27

14.29

1.71

7,980

14.3

17.0

26.2

n/a

National Semiconductor Corp.

NSM

6

13.76

2.91

25.00

2.46

3,300

6.3

28.6

33.6

n/a

Omega Healthcare Investors

OHI

8

22.44

6.60

2.78

14.91

2,210

14.2

8.3

10.0

3.2

ONEOK Inc.

OKE

8

55.47

3.46

4.35

6.64

5,910

11.0

9.1

10.8

11.4

Pharmaceutical Product Development

PPDI

6

27.14

2.21

5.71

43.69

3,230

8.8

48.8

90.4

n/a

Ryder System

R

6

52.64

2.05

8.00

25.45

2,720

6.3

6.7

9.8

5.4

Safeway Inc.

SWY

6

22.49

2.13

20.00

13.82

8,380

20.5

20.1

34.5

n/a

Strayer Education Inc.

STRA

7

152.22

2.63

33.33

14.00

2,060

44.4

35.3

39.1

29.5

Sunoco Logistics Partners LP

SXL

9

83.59

5.60

2.63

1.84

2,760

9.9

10.7

11.9

n/a

Teekay LNG Partners LP

TGP

6

37.99

6.32

5.26

16.39

2,050

3.9

6.1

29.6

n/a

TransAlta Corp.

TAC

5

21.21

5.27

8.12

26.37

4,670

8.1

6.0

5.0

n/a

Watsco Inc.

WSO

9

63.08

3.30

8.33

28.05

2,040

7.9

15.9

26.9

35.2

(Note that Challengers don't always have a 10-year dividend history; I eliminated those with negative 10-year DGRs – which indicate a dividend reduction – but kept those with “n/a.”)

Clearly, there are plenty of great small- and mid-cap candidates to consider. Keep in mind that growth estimates are subject to change and other numbers could be misleading. A lot depends on what industries the reader is interested in adding to his or her portfolio. As always, please consider this no more than a starting point for more in-depth research.

Source: Dividend Champions Smackdown IX