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In previous installments of the Smackdown series, I have 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 rate, and then did separate screens on Dividend Contenders (10-24 years of higher dividends) and Challengers (5-9 years). Last month, I ran parallel screens focusing on the “longest and strongest” dividend streaks, including one that started with the entire universe of “CCC” companies. This month, I'm using that “entire universe” approach to run not one or two, but three simultaneous screens.

On July 4, SA published my article breaking down the CCC companies into three groups: low-, medium-, and high-yield stocks. I think that running separate screens will allow companies to be compared more fairly with their “peers,” while producing worthy investment candidates in each category. So I screened as follows:

Step 1: After eliminating companies that had not increased their dividend in more than a year, I sorted the companies by their 5-year Dividend Growth Rate (or DGR), high to low. (I skipped over the 10-year DGR so as not to unfairly punish Challengers with shorter streaks, nor to provide them with an unfair edge by giving them a pass while eliminating other companies.) After eliminating all but the top 100 companies, I sorted the remaining candidates by their 3-year DGR and reduced the field to the top 64 companies. I chose this number because it makes it easy to cut the numbers in half with each subsequent step.

Step 2: Sort the companies by their Payout Ratio, low to high. This cut each field to 32 companies. I realize that some investors may prefer a high payout ratio, but that would be an entirely different Smackdown.

Step 3: Sort the companies by their Trailing Twelve Months' Price/Earnings Ratio, low to high. This cut each field to 16 companies. I wanted to be sure that the stocks were not overpriced, relative to earnings, even if their payout ratios (in step 2) were low.

Step 4: Sort the companies by their PEG (P/E to Growth) Ratios, low to high. I wanted to be sure that even if current prices were reasonably low compared with current earnings, the expected growth in earnings was relatively high. This step cut each group to eight finalists, which appear below.

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

Low-Yield (0.18% to 1.89%)

No.

6/30

Payout

TTM

PEG

DGR

DGR

Company

Symbol

Yrs

Price

Yield

%Ratio

P/E

Ratio

3-yr

5-yr

American Financial Group

AFG

5

35.69

1.82

15.48

8.50

1.09

12.9

11.5

Andersons Inc. (The)

ANDE

9

42.25

1.04

11.73

11.27

0.80

17.6

16.7

CSX Corp.

CSX

7

26.22

1.83

11.03

6.03

0.92

22.0

35.4

Cummins Inc.

CMI

5

103.49

1.01

16.69

16.45

1.00

26.7

23.9

National Interstate Corp.

NATL

7

22.90

1.57

18.27

11.62

0.94

17.0

32.0

Suncor Energy Inc.

SU

6

39.10

1.13

17.53

15.58

0.82

29.0

29.7

Teva Pharmaceutical

TEVA

12

48.22

1.81

23.44

12.96

0.86

24.8

22.7

TJX Companies Inc.

TJX

15

52.53

1.45

23.90

16.52

0.99

18.8

20.4

Medium-Yield (1.89% to 3.45%)

No.

6/30

Payout

TTM

PEG

DGR

DGR

Company

Symbol

Yrs

Price

Yield

%Ratio

P/E

Ratio

3-yr

5-yr

AFLAC Inc.

AFL

28

46.68

2.57

27.03

10.51

0.60

12.5

21.0

American Greetings

AM-OLD

8

24.04

2.50

28.44

11.39

0.94

12.4

12.5

Archer Daniels Midland

ADM

36

30.15

2.12

19.69

9.28

0.92

9.3

12.0

Best Buy Corp.

BBY

9

31.41

2.04

20.65

10.13

1.01

9.9

13.7

Microsoft Corp.

MSFT

6

26.00

2.46

25.40

10.32

0.95

10.3

11.4

Republic Bancorp KY

RBCAA

13

19.90

3.10

14.13

4.56

0.44

9.8

12.9

Target Corp.

TGT

44

46.91

2.56

29.34

11.47

0.99

17.3

18.5

Tower Group Inc.

TWGP

5

23.82

3.15

24.59

7.81

0.46

46.1

31.3

High-Yield (3.45% to 9.63%)

No.

6/30

Payout

TTM

PEG

DGR

DGR

Company

Symbol

Yrs

Price

Yield

%Ratio

P/E

Ratio

3-yr

5-yr

Alliance Financial Corp.

ALNC

5

30.53

3.93

46.33

11.79

1.65

9.0

6.3

Alliance Resource Prtns

ARLP

9

77.45

4.60

50.07

10.89

0.95

13.4

15.3

ConocoPhillips

COP

11

75.19

3.51

31.73

9.04

1.76

9.4

12.7

Harleysville Group

HGIC

24

31.17

4.62

51.61

11.17

1.45

15.9

14.7

Intel Corp.

INTC

8

22.16

3.79

39.25

10.36

0.80

11.9

14.5

Lockheed Martin

LMT

8

80.97

3.71

37.22

10.05

1.20

21.6

20.2

Raytheon Company

RTN

7

49.85

3.45

36.52

10.58

1.08

12.6

10.8

TransAlta Corp.

TAC

5

21.36

5.23

66.55

12.71

0.81

6.0

5.0

Conclusion

There appears to be excellent diversity among the finalists in each range of yields. Only three Champions are included, all in the Medium-Yield group, whereas the five Contenders are spread among the three groups and the Challengers dominate, with 16 of the 24 finalists. That may be an indication that they have not yet attracted enough attention to have their prices driven up in relation to their earnings and dividends. Keep in mind that growth estimates and other numbers are subject to change. Whatever yield groups the reader is interested in adding to his or her portfolio, there seem to be some good candidates here. As always, please consider this no more than a starting point for more in-depth research.

Disclosure: I am long CSX, AFL, MSFT, INTC, LMT, RTN.

Source: Dividend Champions Smackdown XV