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There is a lot more to profitability than whether a company’s bottom line is increasing. Profits can come from several sources, with some better than others. To get a deeper look into a company’s profit trends, we performed DuPont analysis on “dividend champions,” stocks that have consistently raised their dividend over the last 25 years.

DuPont analyzes return on equity (ROE, or net income/equity) profitability by breaking ROE up into three components:


= (Net Profit/Equity)

= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

We therefore focus on companies with the following positive characteristics: Increasing ROE along with,

  • Decreasing leverage, i.e. decreasing Asset/Equity ratio
  • Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Companies with all of these characteristics are experiencing increasing profits due to operations and not to increased use of financial leverage.

‪Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these companies will continue raising their dividends? Use this list as a starting point for your own analysis.

List sorted by dividend yield.

1. American States Water Company (NYSE:AWR): Provides water, electric, and contracted services in the United States. Market cap of $644.84M. Dividend yield at 3.25%, payout ratio at 46.76%. MRQ Net Profit Margin increased to 13.01% from 5.97% year-over-year, Sales/Assets increased to 0.10 from 0.09, while Assets/Equity decreased to 2.95 from 3.20. The stock has gained 2.78% over the last year.

2. Nacco Industries Inc. (NYSE:NC): Engages in lift trucks, small appliances, specialty retail, and mining businesses primarily in the Americas, Europe, and the Asia-Pacific. Market cap of $674.10M. Dividend yield at 2.65%, payout ratio at 12.11%. MRQ Net Profit Margin increased to 3.12% from 2.03% year-over-year, Sales/Assets increased to 0.47 from 0.41, while Assets/Equity decreased to 3.21 from 3.95. This is a risky stock that is significantly more volatile than the overall market (beta = 2.38). The stock has lost 25.82% over the last year.

3. Archer Daniels Midland Company (NYSE:ADM): Procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. Market cap of $18.32B. Dividend yield at 2.55%, payout ratio at 18.87%. MRQ Net Profit Margin increased to 2.10% from 2.05% year-over-year, Sales/Assets increased to 0.53 from 0.47, while Assets/Equity decreased to 2.25 from 2.34. It's been a rough couple of days for the stock, losing 7.17% over the last week.

4. Brady Corp. (NYSE:BRC): Manufactures and markets identification solutions and specialty products that identify and protect premises, products, and people. Market cap of $1.60B. Dividend yield at 2.42%, payout ratio at 33.28%. MRQ Net Profit Margin increased to 9.36% from 7.97% year-over-year, Sales/Assets increased to 0.19 from 0.18, while Assets/Equity decreased to 1.59 from 1.71. The stock has lost 5.96% over the last year.

5. Parker Hannifin Corporation (NYSE:PH): Manufactures fluid power systems, electromechanical controls, and related components. Market cap of $11.47B. Dividend yield at 1.95%, payout ratio at 19.58%. MRQ Net Profit Margin increased to 9.18% from 8.74% year-over-year, Sales/Assets increased to 0.31 from 0.26, while Assets/Equity decreased to 2.06 from 2.19. It's been a rough couple of days for the stock, losing 7.26% over the last week.

*Dividend champions sourced from DRiP Investing, accounting data sourced from Google 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.