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In previous installments of the Smackdown series, I have screened the Dividend Champions (which can be found here) using factors such as payout ratio, dividend growth rate, and, most recent dividend increase. Beginning last month, I separated the Champions, Contenders, and Challengers into different articles to fit more closely into the format preferred by Seeking Alpha. (Champions are companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years.) I use the same Roman numeral for all three articles.

This month, I'm returning to the second Smackdown, published on July 3, 2010, starting with the yield, followed by the same factors I used back in Smackdown II. So I screened as follows:

Step 1: After eliminating companies that had not increased their dividend in more than a year and those that had agreed to be acquired, I sorted by Yield, focusing on those of at least 3%. That included 45 companies, just as it did in Smackdown II.

Step 2: Sort the companies by Most Recent Increase (column L), high to low. As I did in July of 2010, I eliminated companies with increases of less than 4%. That cut the Champions list to 17 candidates, compared with 16 in Smackdown II.

Step 3: Sort the companies by their 5- and 10-year Dividend Growth Rates (columns AN and AO), in order to eliminate any “historical stinginess” for dividend increases. I eliminated any company with a DGR of less than 5% in either of these columns. Meeting these thresholds were 14 companies.

Step 4: Sort the companies by the A/D (Acceleration/Deceleration) ratio, which divides the 5-year DGR by the 10-year DGR. Dropping those with an A/D ratio below 0.80 cut the list to 12 companies, compared with nine in Smackdown II.

Step 5: Sort the companies by trailing 12 months price/earnings ratio (column U). I eliminated any that had P/E ratios above 18. This left nine candidates, which appear below. (Note that at the time of Smackdown II, the spreadsheet did not include a P/E column, so the nine companies from Step 4 were presented with the then-current P/E from Yahoo.)

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

No.

11/30

%

TTM

5/10

DGR

DGR

Company

Symbol

Yrs

Price

Yield

Inc.

P/E

A/D*

5-yr

10-yr

AFLAC Inc.

(NYSE:AFL)

29

43.44

3.04

10.00

11.03

0.984

21.0

21.3

Altria Group Inc.

(NYSE:MO)

43

28.69

5.72

7.89

17.18

1.268

14.8

11.7

Emerson Electric

(NYSE:EMR)

55

52.25

3.06

15.94

15.93

1.544

9.8

6.4

Illinois Tool Works

(NYSE:ITW)

48

45.44

3.17

5.88

11.42

1.278

16.8

13.1

Johnson & Johnson

(NYSE:JNJ)

49

64.72

3.52

5.56

15.79

0.814

10.6

13.0

Kimberly-Clark Corp.

(NYSE:KMB)

39

71.47

3.92

6.06

17.06

0.877

8.1

9.2

PepsiCo Inc.

(NYSE:PEP)

39

64.00

3.22

7.29

16.04

1.055

13.7

13.0

Procter & Gamble Co.

(NYSE:PG)

55

64.57

3.25

8.97

16.39

1.063

11.6

10.9

Tompkins Financial

(NYSEMKT:TMP)

25

40.10

3.59

5.88

12.65

1.076

6.5

6.1

Conclusion

The only companies to repeat from Smackdown II were Kimberly-Clark, PepsiCo, and Procter & Gamble. At the time, the yield for KMB was 4.35%, exceeded only the 5.18% yield for Leggett & Platt (NYSE:LEG), which had a P/E of over 20. Many of the companies above are familiar names, which suggests that their quality is proven by many different metrics. As always, please consider this no more than a starting point for more in-depth research.

Source: Dividend Champions Smackdown XXI