Dividend Contenders Smackdown XXI

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Includes: COP, ES, HRS, LARK, MDP, NEE, NVS, SPAN, TRI, UGI, UNS
by: David Fish

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. The biggest difference is that there were no listings for Contenders and Challengers back then, so the screening process below has no Smackdown II equivalent. 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 63 companies.

Step 2: Sort the companies by Most Recent Increase (column L), high to low. I eliminated companies with increases of less than 4%. That cut the Contender list to 29 candidates.

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% (or “n/a”) in either of these columns. Meeting these thresholds were 25 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 (or “n/a”) cut the list to 16 companies.

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 11 candidates, which appear below.

(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

ConocoPhillips

(NYSE:COP)

11

71.32

3.70

20.00

9.14

1.045

12.7

12.2

Harris Corp.

(NYSE:HRS)

10

35.60

3.15

12.00

8.20

1.091

27.4

25.1

Landmark Bancorp Inc.

(NASDAQ:LARK)

10

16.11

4.72

5.00

11.03

1.053

7.4

7.0

Meredith Corp.

(NYSE:MDP)

18

29.00

5.28

50.00

10.74

0.937

10.4

11.1

NextEra Energy

(NYSE:NEE)

17

55.44

3.97

10.00

15.23

1.116

7.1

6.4

Northeast Utilities

(NU)

13

34.61

3.76

18.18

14.98

0.883

8.7

9.9

Novartis AG

(NYSE:NVS)

10

54.12

4.35

18.40

12.73

2.883

18.2

6.3

Span-America Medical

(NASDAQ:SPAN)

13

14.10

3.12

10.00

10.85

1.406

18.7

13.3

Thomson Reuters

(NYSE:TRI)

18

27.07

4.58

6.90

16.21

1.476

8.0

5.4

UGI Corp.

(NYSE:UGI)

24

29.96

3.47

4.00

14.54

1.144

6.7

5.9

UniSource Energy

(NYSE:UNS)

12

36.88

4.56

7.69

13.22

0.901

15.5

17.2

Click to enlarge

Conclusion

Note that Novartis is a Swiss company and subject to withholding taxes on its dividends. Its A/D ratio is also quite high, which suggests that the level of dividend increases might be a bit erratic. Also note that UGI just barely made the cut in Step 2. 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.

Disclosure: I am long NEE.