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I've been writing a lot about dividend-paying companies lately, and the interest being generated by the sector in general has been swamping most other sectors. I don't think there's anything more popular right now than dividends, except maybe discussions about Apple (AAPL).

I've found many great dividend-paying companies, and written about ones I think should make up the foundation of any dividend portfolio. I've written about ones that are high-yielding, and I've written about ones that the experts are buying.

Now I have turned my attention to finding what I consider the perfect stock. The company should have a long history of consistently paying and raising dividends. The yield should be high, and the payout ratio should be low, to ensure sustainability. The dividend-growth should be excellent, as should the company's projected earnings growth, and the PE should be reasonable.

I set the following criteria:

  • 10+ years of consistently paying and raising dividends

  • 2.5% yield or higher (current yield of S&P 500 is 2.0%)

  • Payout ratio under 50%

  • 5-year Dividend-growth rate of 7% or better

  • 5-year estimated earnings growth rate of 10% or better (the current 5-year estimated earnings growth rate for the S&P 500 is 10.15%)

  • PE of 14 or under (S&P 500 PE is currently 14)

If a company can beat all those metrics, then I am considering it a perfect dividend-paying stock. Otherwise, you might just as well buy the S&P 50 ETF and earn its dividends.

I used David Fish's incredibly comprehensive worksheets in evaluating for the perfect stock. I considered 105 Dividend Champions (25+ years of dividend-paying) and 178 Dividend Contenders (10-24 years).

And of those 283 companies, I discovered only three that met all of the criteria.

  1. Diebold (NYSE: DBD) is currently priced at about $30 per share. It has paid and raised dividends consistently for 59 years, and yields 3.7%. Its payout ratio is 38% and its PE is 10.1. Its 5-year annual DGR (dividend growth rate) is 12.0% and its estimated 5-year annual EGR (earnings growth rate) is 11.0%.

  2. First of Long Island (NASDAQ: FLIC) is currently trading at $29 per share. The company has paid and raised dividends consistently for 17 years, and it yields 3.4%. Its payout ratio is 43% and its PE is 12.6. Its 5-year annual DGR is 21.5% and its estimated 5-year annual EGR is 10.0%.

  3. Aflac (NYSE: AFL) is currently priced at $50 per share. It has paid and raised dividends consistently for 29 years, and it is yielding 2.7%. Its payout ratio is 24% and its PE is 9.1. Its 5-year annual DGR is 10.6% and its 5-year annual EGR is 11.1%.

There were several companies that came close, including Walgreen (NYSE: WAG), Cracker Barrel (NASDAQ: CBRL), and Billiton Limited (NYSE: BHP).

But if you're looking for perfection as I have defined it, there are only three.

Source: 3 Perfect Dividend Stocks