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This is part V of the dividend champion series. In part IV we looked at five companies that consecutively increased their dividends for 44 years or more with yields as high as 5.7%. In coming up with this list the most important criterion was the ability to raise dividends for over 50 years in a row. We would assign all the companies listed in the table below the maximum rating of 5 stars in terms of making timely dividend payments, consecutively increasing their payments and for dividend payment histories in excess of 50 years. We also looked for companies that generated positive levered free cash flow in excess of $20 million. Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a small amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa. Earnings can often be manipulated via accounting gimmicks, but it’s much harder to fake cash flow.

Our top picks from the list are Dover Corp (DOV) and Genuine Parts Company (GPC); they both have strong/decent quarterly revenue growth (year over year) rates of 22.3%and 11.4% respectively, have raised their dividend payment for more than 50 years in a row and have very strong three total returns of 91% (DOV) and 61% (GPC).

Two other noteworthy dividend payers are Applied Materials Inc (AMAT) and Microsoft Corporation (MSFT), which have yields of 3.00% and 2.7% respectively. AMAT has been paying dividends since 2005, has a five-year dividend growth rate of 11.89%, a five-year dividend average rate of 2.10, a total return of 8% for the past 3 years and operating margins of 22.4%. Net Income for AMAT has experienced a dramatic growth in the past 3 years. In 2008 it was negative $305 million, in 2009 it soared to $938 million and in 2010 it surged to $1.92 billion.

MSFT has a yield of 3.1%, increased dividends for five years in a row, has a manageable payout ratio of 24%, a five-year dividend growth average of 13.09%, a five-year dividend yield average of 2.00% and a total return of 40.81% for the past 3 years. INTC and MSFT would receive a total of 3.5 stars out of a possible five. MSFT Net income continues to surge upward. In 2008 net income was $14.5 billion, in 2009 it was $18.7 billion and in 2010 it jumped to $23.15 billion.

Traders seeking higher yields but who are also open to more risk might find some ideas in the following article Pipeline Stocks With Superb Yields Part III

Stock

Yield

Market Cap

Forward PE

EBITDA (ttm)

Quarterly revenue growth

Operating margins

Revenue

Cash flow

Consecutive Dividend

Increases

AWR

3.2%

646M

13.5

144.1M

7.7%

24.09%

427M

79.2M

57

DOV

2.10%

10.2B

11

1.54B

22.3%

14.9%

8.23B

1.16B

55

GPC

3.10%

8.9B

14.4

979.4M

11.4%

7.27%

12.25B

607.5M

54

PG

3.2%

177B

14

18.54B

8.9%

18.55%

84.35B

12.95B

57

DBD

3.9%

1.7B

---

231.4M

-5.2

6.18%

2.78B

167M

57 years

American States Water Co. (AWR)

It has enterprise value of $ 984 million and price/sales value of 1.59. It has a quarterly revenue growth (yoy) of 7.7%, a ROE of 11.2% and a five-year dividend growth rate of 3.88%, a very strong quarterly earning's growth rate of (yoy) 134%, a total return of 22.9% for the past three years, and has been paying dividends since 1931. It has a levered free cash flow rate of $20.9 million. Net income for the past 3 years has increased nicely; for 2008 it was $22 million, for 2009 it was $29 million and for 2010 it came in at $33 million.

  • ROE 11.21%
  • Return on assets 5.9%
  • Total debt $ 345M
  • 200-day moving average $ 34.38
  • Book value $21.62
  • Dividend yield 5-year Average 2.90%
  • Dividend rate $1.12
  • Payout ratio 47%
  • Dividend growth rate 5-year average 3.88%
  • Paying dividends since 1931
  • Total return last 3 years 22.9%
  • Total return last 5 year 2.34%


Dover Corp (DOV)

It has enterprise value of $11.4 billion and price/sales value of 1.24. It has a quarterly revenue growth (yoy) of 22.3%, a decent ROE of 18.27% and a five-year dividend growth rate of 10.77%, a quarterly earning's growth rate of (yoy) -23%, a strong total return of 91% for the past three years, and has been paying dividends since 1947. It has a strong levered free cash flow rate of $590 million. Net income dipped in 2009 to $356 million from $590 million in 2008, but it managed to almost double its net income in 2010 to $700 million.

  • ROE 18.27%
  • Return on assets 8.62%
  • Total debt $2.19B
  • 200-day moving average $ 56.98
  • Book value $26.32
  • Dividend yield 5-year Average 2.20%
  • Dividend rate $1.26
  • Payout ratio 26%
  • Dividend growth rate 5-year average 10.77%
  • Paying dividends since 1947
  • Total return last 3 years 91%
  • Total return last 5 year 21.83%

Genuine Parts Company (GPC)

It has enterprise value of $8.87 billion and price/sales value of 0.73. It has a quarterly revenue growth (yoy) of 8.9%, a decent ROE of 19.36% and a five-year dividend growth rate of 5.96%, a quarterly earning's growth rate of (yoy) 15.2%, a total return of 61% for the past three years, and has been paying dividends since 1948. It has a strong levered free cash flow rate of $567 million. After dipping from $475 million in 2008 to $399.5 million in 2009, it managed to stabilize its net income at $475 million in 2010. For 2011, net income for the past 3 quarters is $429 million, so if it matches the net income for the last two quarters, which was $151 million, net income could jump to the $580 million range.

  • ROE 19.36%
  • Return on assets 9.94%
  • Total debt $500M
  • 200-day moving average $ 54.09
  • Book value $18.51
  • Dividend yield 5-year Average 3.5%
  • Dividend rate $1.80
  • Payout ratio 55%
  • Dividend growth rate 5-year average 5.96%
  • Paying dividends since 1948
  • Total return last 3 years 61%
  • Total return last 5 year 36%

Procter & Gamble Co (PG)

It has enterprise value of $208 billion and price/sales value of 2.10. It has a quarterly revenue growth (yoy) of 8.9%, a decent ROE of 18.23, and a five-year dividend growth rate of 11.2%, which is strong for a company with a market capitalization of $177 billion. PG has a quarterly earning's growth rate of (yoy) - 1.90%, a total return of 19.43% for the past three years, and has been paying dividends since 1891. It has a massive levered free cash flow rate of $7.66 billion. Net income has been dropping for the past 3 years. In 2008 it was $13.4 billion, in 2009 it was $12.73 billion and in 2010 net income was $11.79 billion. For 2011 the net income so far is roughly $8.3 billion dollars.

  • ROE 18.23%
  • Return on assets 7.24%
  • Total debt $38.5B
  • 200-day moving average $ 63.43
  • Book value $23.27
  • Dividend yield 5-year Average 2.70%
  • Dividend rate $2.10
  • Payout ratio 51%
  • Dividend growth rate 5-year average 11.2%
  • Paying dividends since 1891
  • Total return last 3 years 19.43%
  • Total return last 5 year 15.6%

Diebold, Inc. (DBD)

It has enterprise value of $2.02 billion and price/sales value of 0.64. It has a quarterly revenue growth (yoy) of -5.03% and a five-year dividend growth rate of 3.6%, a quarterly earning's growth rate of (yoy) -9.40%, a total return of 14% for the past three years, and has been paying dividends since 1954. It has a levered free cash flow rate of $148 million. Net income has been dropping rapidly; in 2008 it was $88 million, in 2009 it was $26 million and in 2010 net income turned negative and came in at -$20 billion. For 2011, net income has improved; the net income generated so far totals roughly $64 million.

  • ROE -5.03%
  • Return on assets 4.25%
  • Total debt $703M
  • 200-day moving average $ 29.70
  • Book value $13.24
  • Dividend yield 5-year Average 2.80%
  • Dividend rate $1.12
  • Payout ratio 68%
  • Dividend growth rate 5-year average 3.6%
  • Paying dividends since 1954
  • Total return last 3 years 14%
  • Total return last 5 year -25.86

Conclusion

Almost all the stocks mentioned above are worth considering. However, as stated recently in our latest article, we feel that the markets are choppy. Cycle analysis reveals that the Dow (DIA) and SPX could have a choppy ride for another 5-8 days.

On a short-term basis, the Dow has put in a bottom and is getting ready to challenge the 12,000 ranges again. However, there is a chance that the recent lows could be tested before the rally gathers steam. Going out a little bit further, the cycles suggest that the Dow should be able to rally till early next year and there is a fairly good chance that the Dow could trade to the 12,800 ranges and the and the SPX could trade to the 1305-1330 plus ranges with the possibility of mounting an intra-day spike to the 1340 ranges. The dollar is overbought and has generated a few sell signals on the hourly time frames, so a pullback here would help drive commodities and the general market higher. Hence traders would be best served by using pullbacks to open up positions in the above-mentioned stocks. Our two favourites are DOV and AWR.

Disclaimer: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is very important that you check the finer details in each of the mentioned plays before investing any capital in them.

Source: Best Of The Best: Dividend Champions With Outstanding Records Of Consecutive Dividend Increases, Part V