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If you are looking for sources of dividend income, be sure to check a company's free cash flow to gauge whether they can continue to fund their dividend payment.

Below we present a list of 10 dividend champions (i.e. companies that have consistently raised their dividend over the past 25 years). These companies also appear to be undervalued, and have high levered free cash flow relative to market cap (Levered free cash flow is the free cash flow from operations after paying back interest on debt and making necessary principal repayments for the year)

We last wrote about this screen on April 14, 2011. On that day, the screen produced a list of 8 companies. Since then, 5 out of 8 companies mentioned in that article have outperformed the S&P 500 index (a success rate of 62.5%). The screen averaged a return of 4.1% vs. an index return of 2.6%. Click here to access a full breakdown of the screen's past performance.

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Do you think these are reliable income sources? Use this list as a starting-off point for your own analysis.

List sorted by levered free cash flow as a percent of market cap.

1. Old Republic International Corp. (ORI): Surety & Title Insurance Industry. Market cap of $3.25B. Dividend yield at 5.59%. TTM levered free cash flow at $1.96B, which is 60.39% of market cap. The stock has lost 5.86% over the last year.

2. Pitney Bowes Inc. (PBI):
Business Equipment Industry. Market cap of $5.05B. Dividend yield at 5.98%. TTM levered free cash flow at $817.07M, which is 16.19% of market cap. The stock is a short squeeze candidate, with a short float at 9.79% (equivalent to 8.78 days of average volume). The stock has gained 10.29% over the last year.

3. RLI Corp. (RLI): Property & Casualty Insurance Industry. Market cap of $1.27B. Dividend yield at 1.99%. TTM levered free cash flow at $167.65M, which is 13.19% of market cap. The stock is a short squeeze candidate, with a short float at 8.16% (equivalent to 19.8 days of average volume). The stock has gained 21.15% over the last year.

4. Investors Real Estate Trust (IRET): REIT. Market cap of $758.17M. Dividend yield at 7.24%. TTM levered free cash flow at $87.65M, which is 11.56% of market cap. The stock has gained 14.1% over the last year.

5. AFLAC Inc. (AFL): Accident & Health Insurance Industry. Market cap of $25.75B. Dividend yield at 2.19%. TTM levered free cash flow at $2.78B, which is 10.80% of market cap. The stock has gained 15.7% over the last year.

6. Target Corp. (TGT):
Discount, Variety Stores Industry. Market cap of $35.67B. Dividend yield at 1.93%. TTM levered free cash flow at $3.81B, which is 10.68% of market cap. The stock has lost 4.38% over the last year.

7. The McGraw-Hill Companies, Inc. (MHP)
: Publishing Industry. Market cap of $12.86B. Dividend yield at 2.37%. TTM levered free cash flow at $1.23B, which is 9.57% of market cap. The stock has gained 48.71% over the last year.

8. Diebold, Incorporated (DBD): Business Equipment Industry. Market cap of $2.19B. Dividend yield at 3.34%. TTM levered free cash flow at $182.68M, which is 8.34% of market cap. The stock is a short squeeze candidate, with a short float at 5.25% (equivalent to 6.98 days of average volume). The stock has gained 13.55% over the last year.

9. RPM International Inc. (RPM):
General Building Materials Industry. Market cap of $3.01B. Dividend yield at 3.64%. TTM levered free cash flow at $242.61M, which is 8.05% of market cap. The stock has gained 14.64% over the last year.

10. WGL Holdings Inc. (WGL):
Gas Utilities Industry. Market cap of $2.01B. Dividend yield at 3.95%. TTM levered free cash flow at $161.66M, which is 8.05% of market cap. The stock is a short squeeze candidate, with a short float at 6.31% (equivalent to 15.89 days of average volume). The stock has gained 13.49% over the last year.

*Levered free cash flow sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 10 Dividend Champions With Significant Free Cash Flow