In this series of articles, I will be ranking the Dividend Challengers of various industry sectors based on 15 different metrics. Dividend Challengers are stocks that have 5+ years of consecutive dividend growth. The stocks are part of the U.S. Dividend Champions list that is maintained by Dave Fish.
For part 1 of this series, I will be reviewing the Dividend Challengers that are in the Chemicals industry. These stocks include:
- FMC (NYSE:FMC)
- Dow Chemical (NYSE:DOW)
- Eastman Chemical (NYSE:EMN)
- A. Schulman (NASDAQ:SHLM)
- Balchem (NASDAQ:BCPC)
- Celanese (NYSE:CE)
- LyondellBasell Industries (NYSE:LYB)
- Methanex (NASDAQ:MEOH)
- PolyOne (NYSE:POL)
- Quaker Chemical (NYSE:KWR)
- Scotts Miracle-Gro (NYSE:SMG)
- WD-40 Company (NASDAQ:WDFC)
The stocks will be ranked based on the following 15 metrics:
- Dividend Yield (trailing twelve months)
- Dividend Growth (past five years)
- Payout Ratio (trailing twelve months)
- Revenue Growth (past five years)
- Earnings Growth (past five years)
- Book Value Growth (past five years)
- PE ratio (trailing twelve months)
- PEG ratio (trailing twelve months)
- Price to Free Cash Flow ratio (trailing twelve months)
- Return on Assets (trailing twelve months)
- Return on Equity (trailing twelve months)
- Return on Invested Capital (trailing twelve months)
- Earnings Yield (trailing twelve months)
- Debt to Equity ratio (trailing twelve months)
- Asset Utilization (trailing twelve months)
Book Value Growth
Price to Free Cash Flow Ratio
Return on Assets
Return on Equity
Return on Invested Capital
Debt to Equity Ratio
For each metric, the best performing stock has a ranking of 1 and the worst performing stock has a ranking of 12. Similar to golf, the stock with the lowest overall score is the best performer based on these metrics. The overall rankings are:
- LyondellBasell - Total Score of 58
- Dow Chemical - Total Score of 62
- FMC - Total Score of 79
- Eastman Chemical - Total Score of 88
- PolyOne - Total Score of 92
- WD-40 Company - Total Score of 98
- Quaker Chemical - Total Score of 99
- Balchem - Total Score of 102
- Methanex - Total Score of 115
- Scotts Miracle-Gro - Total Score of 115
- Celanese - Total Score of 123
- A. Schulman - Total Score of 137
Out of this group of stocks, I feel that each of the heavyweight stocks (LyondellBasell, Dow Chemical, FMC, and Eastman Chemical) all our strong investment opportunities for long term dividend investors.
LyondellBasell currently offers the highest dividend yield and dividend growth out of these stocks. Even though the company's revenue and earnings growth have not been great in the current difficult market environment, the company maintains a healthy balance sheet and provides strong returns on assets, equity, and invested capital.
The other three heavyweight stocks all have solid earnings yields, offer solid returns, and are priced attractively.
I believe the middleweight stocks listed (PolyOne, WD-40, Quaker Chemical, and Balchem) also are strong companies that are solid investment opportunities for certain investors. While I do not believe they offer as much value at the moment as the heavyweight stocks, I do think they have the potential to generate strong returns, but some investors may want to stay away for specific reasons. For example, Balchem has a low dividend yield under 1% which may keep some dividend investors away. However, other investors who like the company's decent dividend growth and impressive revenue, earnings, and book value growth may be interested. Other investors may want to wait for a dip in price to find a more attractive entry point for stocks such as WD-40 and Quaker Chemical.
I would avoid the lightweight stocks (Methanex, Scotts Miracle-Gro, Celanese, and A. Schulman) for now. While these companies do possess some strong qualities, I don't believe that any of them will outperform the heavyweight stocks mentioned earlier. Whether it is poor revenue/earnings growth, poor returns, or poor valuations, these stocks possess enough negative traits that I believe will limit future success of these stocks. And they do not have strong enough combinations of dividend yields and growth to make up for some of the financial qualities they currently lack.
As always, I suggest individual investors perform their own research before making any investment decisions.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.