As discussed in a previous Seeking Alpha article, it was proposed that Dividend Champion stocks with year-over-year (YoY) dividend growth rates (DGRs) of >= 15%, on average, drastically outperform the S&P 500, and to a lesser extent, the entire collection of Dividend Champion stocks over the subsequent two-year period. Now that 2011 is in the books, 2011 DGRs can be computed, and this criterion can be used to select the basket of Dividend Champion stocks for the next 2 years.
For reference, Dividend Champion stocks are those which have increased their dividend for at least 25 consecutive years. Outperformance is judged on total return, which is defined as stock price appreciation + total dividends received over the next 2 years. Below is the list of Dividend Champion stocks with DGRs >=15% in 2011.
|(SWK)||22.4||industrials||Stanley Black and Decker|
|(HRL)||21.8||consumer staples||Hormel Foods|
|(GWW)||21.2||industrials||W. W. Grainger Inc.|
|(APD)||18.4||materials||Air Products and Chemicals|
|(FDO)||16.1||consumer discretionary||Family Dollar|
It should be noted that this list does not represent a diversified list across all sectors, with no names from the financial, health care, or technology sectors
1. Parker-Hannifin Corporation (Parker) (PH) is a full-line diversified manufacturer of motion and control technologies and systems, including fluid power systems, electromechanical controls and related components. In 2012, the mean earnings analyst forecast is 7.44, which represents a forward price-to-earnings of 11. Earnings for PH have grown at a 5-year annualized rate of 12.6%. PH currently pays out 1.48 per share on an annualized basis which translates to a yield of 1.8%.
2. Target (TGT) - Mean earnings forecast for 2012 are $4.24 per share, which represents a forward PE of 11.8. Earnings have grown at 8.1% on an annualized basis over the last 5 years. Current quarterly dividend of $0.30 represents a 2.4% annual yield. The dividend has grown by 19.1% annualized over the last 5 years.
3. Walgreen (WAG) - Earnings are expected to come in at $2.73 per share, which is a bit lower than the $2.94 in 2011. This results in a forward PE of 11.9. Even so, WAG features a 11.3 annualized 5-year growth rate. The dividend is currently set at $0.23 per quarter, which represents a 2.8% yield. Dividends have grown by 22.4% on an annualized basis over the last 5 years.
4. Lowes (LOW) - Earnings growth has been nearly flat over the last 5 years, coming in at -3.8% on an annualized basis. The mean 2012 earnings per share are projected to be $1.61, which translates to a forward PE of 16.3. The quarterly dividend is set at $0.14, resulting in a dividend yield of 2.1%
5. Stanley Black & Decker (SWK) - Earnings for 2012 are forecasted to be $5.93 per share, with a forward PE of 12.1. The earnings in 2012 are forecasted to increase by approximately 32% relative to 2011. The SWK quarterly dividend currently sits at 0.41, which represents a yield of 2.3%
6. Hormel Food Corporation (HRL) - The mean analyst 2012 earnings per share are forecasted to be $1.82, which translates to a forward PE of 15.9. The EPS annualized 5 year growth rate for HRL is 11.2%. The current HRL dividend yield on an annualized basis is 1.8% based on a quarterly dividend of $0.14.
7. W.W. Grainger (GWW) - The mean analyst EPS forecast for 2012 is $10.27 per share, which represents a forward PE of 19.1. Earnings for GWW have grown by 12.9% annually over the last 5 years. The quarterly dividend is set at $0.66 per share, which represents an annual yield of 1.3%.
8. Walmart (WMT) - Walmart features an annualized 5-year growth rate of 9.0%. Mean earnings forecast for 2012 is $4.49 per share, which represents a forward PE of 13.2. WMT's quarterly dividend is set at $0.37, which represents a yield of 2.5%.
9. Air Products and Chemicals (APD) - Earnings for 2012 are forecasted to come in at $6.03 per share, and have grown by 11.6% on an annualized basis over the last 5 years. APD yields 2.6% based on a current quarterly dividend of $0.58 per share.
10. Family Dollar (FDO) - The analyst mean EPS forecast for 2012 is currently at $3.62, which represents a forward PE of 14.9. Earnings for FDO have grown by 19.9% annualized for the last 5 years. The quarterly dividend of $0.18 results in an annual yield of 1.3%.
11. Tennant Company (TNC) - The annual EPS for 2012 is forecasted to be $2.43, which represents a forward PE of 15.9. TNC currently yields 1.8% given its quarterly dividend of $0.17 per share.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.