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.
