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Dividend Champions Smackdown XXXI

In the most recent installments of the Smackdown series, I screened the Dividend Champions (which can be found here) for high yield and low payout ratio and, last month, using a "7% Solution" for dividend and earnings growth.

(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 decided to take a cue from my recent article about market capitalization (which can be found here) and the ensuing comments. In order to isolate the top candidates in each capitalization class (Large-, Mid-, and Small-Cap), I effectively ran a "triple Smackdown." 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 Market Capitalization (column AE) and segregated the Champions into 41 Large-Cap (above $10 billion), 34 Mid-Cap ($2-10 billion), and 26 Small-Cap (under $2 billion) companies.

Step 2: Sort each group by their 5-year Dividend Growth Rate (column AN), high to low. Dropping the "lesser" half of each group cut the lists to 21 Large-Caps, 17 Mid-Caps, and 13 Small-Caps.

Step 3: Sort each group by their 5-year Estimated Earnings Per Share Growth (column AC), high to low, and eliminate the lower half of each group. That cut the lists to 11 Large-Caps, 8 Mid-Caps, and 6 Small-Caps.

Step 4: Sort each group by Yield (column I), high to low, and eliminate the lower half. This step cut the lists to 5 Large-, 4 Mid-, and 3 Small-Cap companies, which appear below.

(Note that I've sorted each group back into alphabetical order.)

Company

Ticker

No.

9/28

Div.

Est 5-yr

MktCap

DGR

Name

Symbol

Yrs

Price

Yield

Growth

($Mil)

5-yr

AFLAC Inc.

(NYSE:AFL)

29

47.88

2.76

10.6

22,421

17.5

Air Products and Chem.

(NYSE:APD)

30

82.70

3.10

9.1

17,508

10.7

Automatic Data Proc.

(NASDAQ:ADP)

37

58.66

2.69

9.4

28,421

14.2

McDonald's Corp.

(NYSE:MCD)

36

91.75

3.36

9.6

92,523

20.4

Walgreen Company

(NYSE:WAG)

37

36.44

3.02

12.0

31,283

22.9

Carlisle Companies

(NYSE:CSL)

36

51.92

1.54

12.0

3,250

6.1

Leggett & Platt Inc.

(NYSE:LEG)

41

25.05

4.63

15.0

3,522

9.9

Pentair Inc.

(NYSE:PNR)

36

44.51

1.98

11.0

4,415

7.4

Valspar Corp.

(NYSE:VAL)

34

56.10

1.43

11.4

5,093

10.4

Brady Corp.

(NYSE:BRC)

27

29.28

2.60

11.0

1,498

6.5

Mine Safety Appliances

(NYSE:MSA)

41

37.27

3.01

10.3

1,378

8.7

SJW Corp.

(NYSE:SJW)

45

25.36

2.80

14.0

473

4.0

Conclusion

As usual, there are some familiar names, but a couple of things stand out. The Large-Caps had the strongest Dividend Growth, whereas the Mid-Caps, except for Leggett & Platt, have Yields below 2%, but the smaller companies generally have stronger 5-Year Earnings Estimates. Note that Pentair is merging with a Swiss company and will become a foreign entity, with various tax ramifications. 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 XXXI