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Dividend Contenders Smackdown XXIV

In the most recent installments of the Smackdown series, I screened the Dividend Champions (which can be found here: http://dripinvesting.org/Tools/Tools.asp ) starting with new columns that I titled Confidence Factor and the 5-year Estimated Payback Percentage.

(Note that I have 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 wanted to identify companies that have not run up substantially in price, but might still represent good value and offer a decent entry price. So 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 percentage below the 52-week high (column AH). Eliminating companies that were not down at least 10% from their 52-week highs cut the list to 56 companies.

Step 2: Sort the companies by their trailing twelve months' Price/Earnings Ratio (column U), low to high. I eliminated companies with P/Es above 20 (or negative). That cut the list to 36 candidates. I figured that companies with earnings difficulty might reasonably have been sold off.

Step 3: Sort the candidates by their Yield (column I), high to low. Dropping those with yields below 2% cut the list to 26 companies. I wanted to see at least that much from companies that were down at least 10% from their peaks.

Step 4: Sort the companies by their 5-year Dividend Growth Rate (column AN), in order to ensure that the remaining candidates had consistent histories of dividend increases. I eliminated any company with a DGR of less than 8%. Meeting this threshold were 16 companies.

Step 5: Sort the companies by the Most Recent Dividend Increase Percentage (column L), in order to eliminate more recent "stinginess" for dividend increases. Dropping those with increases of less than 7% cut the list to 10 companies, which appear below.

(Note that I've sorted the table back into alphabetical order.)

Company

Stock

No.

2/29

Div

%

TTM

52-wk

DGR

Name

Symbol

Yrs

Price

Yield

Inc.

P/E

High

5-yr

BHP Billiton Ltd.

(BHP)

10

76.82

2.86

8.91

9.03

-26.6

22.9

BHP Billiton plc

(BBL)

10

64.81

3.39

8.91

7.62

-25.5

22.9

Cardinal Health Inc.

(CAH)

22

41.55

2.07

10.26

15.39

-11.7

22.3

Harris Corp.

(HRS)

11

43.63

3.03

17.86

10.10

-18.3

22.8

Nippon Tel&Tel

(NTT)

10

23.56

3.49

18.85

5.98

-10.5

23.4

Norfolk Southern

(NSC)

11

68.90

2.73

9.30

12.64

-12.2

19.5

NTT DoCoMo Inc.

(DCM)

10

17.09

4.02

15.59

12.95

-12.6

16.7

Occidental Petroleum

(OXY)

10

104.37

2.07

17.39

12.54

-11.5

17.1

Owens & Minor Inc.

(OMI)

15

29.96

2.94

10.00

16.55

-16.1

14.9

Teva Pharmaceutical

(TEVA)

13

44.81

2.39

18.98

14.50

-12.7

24.1

Conclusion

Once again this month, some familiar names have come up, half of them foreign companies. As always, investors should consider the tax withholding implications of these firms, especially in retirement accounts, which do not qualify for offsetting tax credits. As always, please consider this no more than a starting point for more in-depth research.

As an extra step, I'm including one of Chuck Carnevale's F.A.S.T. Graphs for the company that appears to be the most undervalued, as indicated by its price line being in the green-shaded earnings area, just below.

Source: Dividend Contenders Smackdown XXIV