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Dividend Challengers 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 73 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 51 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 31 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 25 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 17 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

Acme United Corp.

(ACU)

8

10.00

2.80

16.67

11.24

-13.3

15.8

American Greetings

(AM-OLD)

8

15.00

4.00

7.14

7.54

-39.6

13.0

Ameriprise Financial

(AMP)

8

55.76

2.01

21.74

12.76

-13.2

14.6

Arch Coal Inc.

(ACI)

8

13.57

3.24

10.00

18.34

-63.3

14.3

CNOOC Ltd.

(CEO)

6

226.48

2.83

21.60

9.44

-16.7

17.8

Compass Minerals

(CMP)

9

72.05

2.75

10.00

16.19

-26.6

8.1

CSX Corp.

(CSX)

7

21.01

2.28

38.46

12.58

-22.4

32.3

Deere & Company

(DE)

9

82.93

2.22

12.20

12.29

-16.9

14.3

Hasbro Inc.

(HAS)

9

35.32

4.08

20.00

12.52

-27.1

22.3

Int'l Flavors & Fragr.

(IFF)

9

57.03

2.17

14.81

17.49

-14.0

8.6

L-3 Communications

(LLL)

9

70.25

2.85

11.11

7.78

-20.7

19.1

National Healthcare

(NHC)

8

44.82

2.68

7.14

11.49

-15.6

11.9

Ryder System

(R)

7

53.23

2.18

7.41

16.23

-11.8

9.2

Safeway Inc.

(SWY)

7

21.45

2.70

20.83

14.40

-15.7

19.7

Somerset Hills Banc.

(SOMH)

7

8.40

3.33

16.67

16.15

-10.6

21.8

Steris Corp.

(STE)

7

31.38

2.17

13.33

14.26

-14.6

30.4

Williams-Sonoma

(WSM)

7

38.60

2.28

29.41

18.12

-15.1

17.1

Conclusion

The companies that survived this screen offer a wide variety of industries and price points. For an investor focusing on yield, dividend growth, or other factors, one or more might represent a "diamond in the rough" for long-term accumulation. 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 Challengers Smackdown XXIV