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In the most recent installments of the Smackdown series, I screened the Dividend Champions (which can be found here starting with new columns that I titled Confidence Factor and the 5-year Estimated Payback Percentage and last month focused on companies that were down in price.

(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 started with the latest column added, Beta, which measures a stock's volatility against that of the market. Since the market's Beta is defined as 1.00, numbers below that level are considered less prone to sharp upward or downward movement, so they appeal to "sleep well at night" investors, who don't want to be unnerved worrying about stock volatility. 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 Beta (column AF), low to high. Eliminating companies that had Betas above 0.90 cut the list to 53 companies. I also decided to eliminate companies whose Beta is very low, reasoning that an investor doesn't want a stock that seems almost "dead," or inclined to achieve almost no price appreciation. Eliminating companies that had Betas below 0.30 cut the list to 48 companies.

Step 2: Sort the companies by the their Estimated Earnings Per Share for This Year, Next Year, and the Next 5 Years (columns AA to AC). Dropping any company that has a negative projection in any of these columns cut the number of candidates to 26 companies.

Step 3: Sort the candidates by their Yield (column I), high to low. Dropping those with yields below 2% cut the list to 23 companies.

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 13 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.

3/30

Div

LY%

TY%

NY%

Est5yr

Mkt

DGR

Name

Symbol

Yrs

Price

Yield

Inc.

Grth

Grth

Grth

Beta

5-yr

Archer Daniels Midland

(ADM)

36

31.66

2.21

9.38

4.5

22.3

5.7

0.48

10.4

Automatic Data Proc.

(ADP)

37

55.19

2.86

9.72

5.0

10.2

9.6

0.70

14.2

Becton Dickinson & Co.

(BDX)

40

77.65

2.32

9.76

14.1

10.0

8.6

0.58

13.8

Hormel Foods Corp.

(HRL)

46

29.52

2.03

17.65

19.3

7.1

10.3

0.45

12.7

McCormick & Co.

(MKC)

26

54.43

2.28

10.71

1.4

9.5

7.5

0.41

9.2

McDonald's Corp.

(MCD)

35

98.10

2.85

14.75

15.0

10.3

10.4

0.43

20.4

Medtronic Inc.

(MDT)

34

39.19

2.48

7.78

2.5

6.4

6.8

0.85

17.8

Procter & Gamble Co.

(PG)

55

67.21

3.12

8.97

11.3

8.3

8.5

0.44

11.2

Target Corp.

(TGT)

44

58.27

2.06

20.00

7.0

13.7

11.9

0.90

20.1

Wal-Mart Stores Inc.

(WMT)

38

61.20

2.60

8.90

8.5

9.1

9.3

0.34

16.5

(Chart from Author; includes underlying data from FinViz.com)

Conclusion

It's again no surprise that the final companies above are familiar names, confirming their status as high-quality dividend growth investments. Except for Procter & Gamble, none are yielding more than 3% at this time, but their strong dividend growth histories suggest that long-term investors can still achieve a high yield-on-cost, supplemented by persistent price appreciation. 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 Champions Smackdown XXV