There are also "Dividend Contenders", stocks which have increased dividend payouts for the past 10-24 years and "Dividend Challengers", stocks with 5-9 years of consequetive dividend increases.
There are 244 Dividend Champions and Dividend Contenders for May. Below are the top ranked Champions and Contenders based on a ranking system I designed which ranked each stock in the following:
- Dividend Yield - Stocks were ranked in descending order of yield. The highest yield stock received a rank of 1, which was Vector Group (VGR).
- Payout Ratio Rank - Stocks were ranked in ascending order of payout ratio. The stock with the lowest payout ratio received a rank of 1, which was RenaissanceRe Holdings (RNR).
- 5/10 AD Rank - Stocks were ranked in descending order of "AD", the Acceleration/Deceleration ratio (5-year average increase in dividends divided by 10-year average increase in dividends). In other words, this is a metric to show an increase in the dividend growth rate from 10 to 5 years. The stock with the highest "AD" ratio, Norfolk Southern (NSC) received a rank of 1.
- 1 Year Dividend Growth - Stocks were ranked in descending order of their 1 year dividend growth rate. The stock with the highest 1 year dividend growth rate, Canadian Natural Resources (CNQ) received a rank of 1.
- The four ranks were combined to give an "overall" score for the entire list of 244 stocks.
Below are the 10 stocks with the highest overall score. There are 4 stocks on the list with a yield below 2%, which may be a turnoff for investors hungry for yield. A fifth stock, Target (TGT), has a yield hovering near 2%.
Novartis AG (NVS), Harleysville Group (HGIC) and ConocoPhilips (COP) are the three stocks on the list with yields above 3%. All also show a balance of reasonable payout ratios and dividend growth.
HGIC recently reported earnings and grew quarterly earnings by $.01 versus the first quarter of 2010 and the market reacted tepidly. The company saw an increase in claims due to severe winter weather. It has maintained a low debt/equity ratio of .15.
ConocoPhilips may have the best current combination of high yield/low payout on the list. However, it is in the energy sector so its earnings will be affected by commodity prices. A signficant decrease in earnings could affect the payout ratio (if earnings decrease, just as an increase in earnings at a rate greater than dividend growth will decrease the payout ratio.
One concern with COP is that it recently broke below an upward channel and has had difficulty breaking above the $81-$82 range:
Chart courtesy of Finviz
Company | Symbol | Yield | Yield Rank | Payout Ratio | Payout Rank | 5/10 AD | 5/10 AD Rank | 1 yr Div Growth | 1 yr growth Rank |
Novartis AG | 3.98 | 53 | 56.28 | 159 | 2.883 | 3 | 15.5 | 22 | |
International Business Machines | 1.76 | 171 | 25.19 | 48 | 1.522 | 18 | 16.3 | 21 | |
Target Corp. | 2.04 | 152 | 25.00 | 44 | 1.242 | 58 | 23.5 | 12 | |
Span-America Medical Systems | 2.88 | 107 | 30.56 | 69 | 1.406 | 28 | 8.1 | 82 | |
Harleysville Group | 4.49 | 41 | 59.50 | 165 | 1.539 | 15 | 9.6 | 66 | |
General Dynamics | 2.58 | 123 | 27.61 | 57 | 1.293 | 47 | 10.1 | 60 | |
Church &Dwight | 1.65 | 183 | 36.27 | 95 | 1.639 | 7 | 34.8 | 5 | |
Stryker Corp. | 1.22 | 217 | 22.71 | 34 | 1.363 | 33 | 20.0 | 14 | |
ConocoPhillips | 3.35 | 76 | 34.65 | 86 | 1.045 | 104 | 12.6 | 37 | |
Walgreen Company | 1.64 | 185 | 29.66 | 66 | 1.313 | 43 | 25.0 | 10 |
