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I have written extensively on the US Dividend Champion list maintained and updated by DRIP Investing. The list is comprised of stocks which have increased their dividend payout for at least 25 consecutive years. My recent Dividend Champion articles on Scott's Investments have focused on one or two company metrics, such as payout ratio, yield, or past performance. However, for this article I created a simple quantitative system which combines multiple metrics to give an "overall" rank of the stocks within the US Dividend Champion December list.

This ranking system combines Dividend Yield, Payout Ratio, Forward Price/Earnings, and price momentum (as measured by the average of the quarterly, half year, and year returns). I required the stock be yielding at least 3% in order to qualify for inclusion. For those interested in creating a system of their own for free using Finviz and Excel, Open Office, or Google Docs please see a recent article providing in-depth step by step instructions.

Historical tests have shown that stocks with higher yields and lower payout ratios as well as those with higher yields and higher price momentum have tended to outperform other stocks. History very well may not repeat itself; however, I believe it provides a basic foundation for research and further due diligence. Starting with the 98 stocks on January's Dividend Champion list which was reduced further to the 39 stocks yielding at least 3%, the top 10 stocks based Dividend Yield, Payout Ratio, Forward P/E and price momentum are below. Equal weight was given to yield (the higher the better), payout (the lower the better), Forward P/E (the lower the better), and price momentum (the higher the better).

These certainly are not the only company metrics of importance nor is providing equal weight to each metric the only method for establishing overall ranks. For example, an investor seeking higher yields and willing to accept higher payout ratios could create a system in which yield is given more weight.

The top ranked stocks in order are below. The wireless carrier everyone loves to hate, AT&T, leads the list based on the metrics used for this analysis. Given that equities could see a short to intermediate term correction as argued here, these Champions could find themselves at a further discount in the near future.

I look forward to any feedback and would be willing to create different systems upon request.

Ticker

Company

Dividend Yield

Forward P/E

Payout Ratio

3-6-12 Mo Avg Return

T

AT&T, Inc.

6.07%

11.33

47.03%

11.87%

MO

Altria Group Inc.

6.34%

11.88

80.01%

13.34%

CTL

CenturyLink, Inc.

6.69%

13.46

91.58%

24.14%

CTBI

Community Trust Bancorp Inc.

4.22%

13.77

59.63%

15.90%

UVV

Universal Corp.

5.03%

8.3

33.77%

-9.62%

PBI

Pitney Bowes Inc.

6.10%

10.41

85.93%

11.70%

CINF

Cincinnati Financial Corp.

5.04%

21.73

52.02%

18.23%

RPM

RPM International Inc.

3.74%

14.13

64.64%

17.52%

SON

Sonoco Products Co.

3.14%

13.74

51.72%

13.53%

MGEE

MGE Energy Inc.

3.52%

15.06

57.84%

17.78%

Data source: Finviz

Source: 10 Top Ranked Dividend Champions Yielding at Least 3%