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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 Beta and, last month, with the stocks' most recent (percentage) increase.

(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 five to nine years. I use the same Roman numeral for all three articles.)

This month, I decided to focus on the relationship between earnings and dividends, since the former should drive the latter. 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 Estimated Earnings Per Share Growth for the Next Five Years (column AC), high to low. Eliminating companies that had percentages below 7% cut the list to 113 companies.

Step 2: Sort the companies by their Five-Year Dividend Growth Rate (column AN), in order to ensure that the remaining candidates had consistent histories of dividend increases, an indication that these companies had not only achieved good earnings growth, but had also passed that along to their owners. I eliminated any company with a DGR of less than 7%. Meeting this threshold were 76 companies.

Step 3: Sort the candidates by their Yield (column I), high to low. Dropping those with yields below 2% cut the list to 47 companies.

Step 4: Sort the companies by their Price/Earnings Ratio (column U), in order to avoid stocks that may be overvalued. Dropping those with P/Es over 15 cut the list to 20 companies, which appear below.

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

Company

Stock

No.

5/31

Div.

TTM

Est 5-yr

DGR

Name

Symbol

Yrs

Price

Yield

P/E

Growth

5-yr

Alliance Holdings GP

(NASDAQ:AHGP)

7

41.57

6.42

11.74

14.0

39.5

Ameriprise Financial

(NYSE:AMP)

8

47.92

2.92

10.51

13.2

14.6

Assurant Inc.

(NYSE:AIZ)

9

33.38

2.52

5.50

10.3

13.0

Baxter International

(NYSE:BAX)

5

50.62

2.65

12.85

8.8

16.3

BOK Financial Corp.

(NASDAQ:BOKF)

8

55.75

2.73

12.58

8.4

15.5

CNOOC Ltd.

(NYSE:CEO)

7

179.35

3.80

7.26

9.1

17.8

Coca-Cola Enterprises

(NYSE:CCE)

5

27.36

2.34

11.74

9.3

16.3

CSX Corp.

(NYSE:CSX)

8

20.89

2.68

11.94

9.6

32.3

Deere & Company

(NYSE:DE)

9

73.87

2.49

10.23

10.9

14.3

Hasbro Inc.

(NASDAQ:HAS)

9

35.42

4.07

13.02

8.1

22.3

Intel Corp.

(NASDAQ:INTC)

9

25.84

3.48

10.95

10.7

14.4

Kaydon Corp.

(NYSE:KDN)

5

22.31

3.59

14.68

10.5

9.9

Kellogg Company

(NYSE:K)

8

48.78

3.61

14.43

8.1

7.9

Lockheed Martin

(NYSE:LMT)

9

82.80

4.83

10.04

7.1

21.1

Microsoft Corp.

(NASDAQ:MSFT)

7

29.19

2.74

10.61

8.9

12.9

Raytheon Company

(NYSE:RTN)

8

50.32

3.97

9.05

8.6

12.1

Rogers Commun.

(NYSE:RCI)

7

34.31

4.61

12.48

7.4

81.4

Ryder System

(NYSE:R)

7

43.21

2.68

12.42

10.3

9.2

Safeway Inc.

(NYSE:SWY)

8

19.02

3.68

10.81

8.1

19.7

Steris Corp.

(NYSE:STE)

7

29.86

2.28

12.93

8.1

30.4

Conclusion

The result again includes some familiar names from other recent Smackdowns. As mentioned in those, potential investors should carefully consider the impact of tax issues with MLPs (Master Limited Partnerships) and ADRs (American Depository Receipts). 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 XXVII