The CCC list is an invaluable source for dividend growth investors. Compiled and updated by David Fish, the list contains U.S. companies with at least 5 consecutive years of increasing dividends. The accompanying spreadsheet provides key statistics of the CCC stocks.
The CCC stocks is divided into 3 categories based on the number of consecutive years of increases: Champions are stocks with 25 or more years of increasing dividends. Contenders have 10-24 consecutive years of dividend increases. And Challengers have a streak of 5-9 years of increasing dividends. The latest list (dated 2/29/16) contains 766 stocks, with 107 Champions, 250 Contenders, and 409 Challengers.
The Ranking Process
Ranking 766 stocks would be a daunting task. Instead, I apply a series of screens to reduce the number of stocks to something more manageable. I use different screens every month to allow for some variation. Typically, I consider fewer than 300 stocks.
I rank these stocks using a proprietary system that favors established dividend paying stocks with strong fundamentals. This process is based entirely on data available in the CCC spreadsheet. I then collect data from other sources like Morningstar, S&P Capital IQ, and F.A.S.T. Graphs. Since this is a manual process, I do this only for the best 24 stocks.
The final step is to rank the 24 stocks again, this time using all available data. I also assign a 7-star rating to each stock. Stocks with a 5-star rating or better is worthy of further analysis and only the very best stocks would earn a 7-star rating.
Trimming the CCC list
This month, I applied the following screens to trim the CCC list:
- Non-utility stocks: Dividend Yield + 5-year Dividend Growth Rate >12 (removes 266 stocks)
- Utility stocks: Dividend Yield >4 and Dividend Growth Rate >4 (removes 50 stocks)
- 2.0≤ Dividend Yield ≤9.0 (removes 146 stocks)
- No stocks being acquired and no over-the-counter stocks (removes 14 stocks)
The first 2 screens implement the so-called Chowder Rule, which is provided in the CCC spreadsheet in column CD. Screen #3 removes low yielding stocks as well as stocks with potentially unsustainable high yields.
The 4 screens together remove 476 stocks, leaving 290 candidates to be considered.
Ranking and Rating
First-order ranking is based entirely on data available in the CCC spreadsheet. Subsequently, I collect additional data for the best 24 stocks and rank them again, using all available data. I also assign a 7-star rating to each stock.
Here are the top 10 ranked stocks for March 2016, with stocks I own highlighted: There are 6 new stocks. For each of the 4 repeaters, a subscript indicates the stock's previous ranking. For example, VLO3 means the stock was ranked third in last month's list.
Following is a table presenting the top 10 ranked stocks by sector, along with star ratings for each stock: According to my star rating system, all 10 stocks earned a 5-star rating. I consider stocks with a 5-star rating or better worthy of further analysis.
In the following descriptions, yield is calculated based on closing prices on 23 March 2016, payout is the EPS (earnings per share) payout ratio, and debt is the debt to equity ratio. Morningstar's moat and Standard & Poor's credit ratings are also provided.
• T. Rowe Price Group (NASDAQ:TROW)
streak 30 yrs | 5-yr growth rate 14.0% | yield 2.95%@ $73.10
payout 46% | debt 0% | moat wide | credit rating n/a
Founded in 1937 and based in Baltimore, Maryland, Dividend Champion TROW is a financial services holding company that provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds and other investment portfolios, as well as through variable annuity life insurance plans. TROW trades at a discount of 3% to my fair value estimate of $75.51.
• Viacom Inc. (NASDAQ:VIAB)
streak 6 yrs | 5-yr growth rate 38.5% | yield 4.03%@ $39.70
payout 34% | debt 340% | moat narrow | credit rating BBB-
Headquartered in New York, VIAB operates as an entertainment content company in the United States and in over 160 countries and territories. The company creates television programs, motion pictures, short-form content, applications, games, consumer products, social media and other entertainment content. The Company operates through two segments: Media Networks and Filmed Entertainment. VIAB trades 46% below my fair value estimate of $57.96.
• International Business Machines (NYSE:IBM)
streak 20 yrs | 5-yr growth rate 14.9% | yield 3.57%@ $145.47
payout 38% | debt 280% | moat narrow | credit rating AA-
Founded in 1910 and headquartered in Armonk, New York, IBM is an information technology company engaged in the development and manufacturing of advanced computer systems, software, storage systems and microelectronics. The company creates business value for clients and solves business problems through integrated solutions that leverage information technology and knowledge of business processes. IBM is trading at a discount of 12% to my fair value estimate of $162.34.
• HollyFrontier Corp. (NYSE:HFC)
streak 5 yrs | 5-yr growth rate 34.3% | yield 3.76%@ $35.07
payout 34% | debt 20% | moat narrow | credit rating BBB-
HFC is an independent petroleum refiner in the United States. The company produces refined products, such as gasoline, diesel fuel, jet fuel, lubricant products, and specialty and modified asphalt. It has refineries in Kansas, Oklahoma, New Mexico, Wyoming, and Utah. The company markets its refined products in the Mid-Continent, Southwest, and Rocky Mountain regions of the United States. HFC was founded in 1947 and is based in Dallas, Texas. HFC trades 16% below my fair value estimate of $40.69.
• Valero Energy Corp. (NYSE:VLO)
streak 6 yrs | 5-yr growth rate 56.2% | yield 3.70%@ $64.90
payout 30% | debt 36% | moat narrow | credit rating BBB
Founded in 1955 and based in San Antonio, Texas, VLO is an independent petroleum refining and marketing company. VLO's refineries produce conventional and premium gasoline, including gasoline meeting the specifications of the California Air Resources Board. VLO's ethanol segment produces ethanol and distillers grain. VLO is trading at a discount of 13% to my fair value estimate of $73.22.
• Polaris Industries Inc. (NYSE:PII)
streak 21 yrs | 5-yr growth rate 21.5% | yield 2.29%@ $96.22
payout 33% | debt 47% | moat wide | credit rating n/a
PII designs, engineers, manufactures and markets off-road vehicles, snowmobiles, motorcycles and small vehicles. These products are sold through dealers and distributors located in the United States, Canada and Europe. The company also produces and supplies replacement parts for its product lines. PII was founded in 1987 and is headquartered in Medina, Minnesota. PII is trading at a discount of 10% to my fair value estimate of $106.10.
• V.F. Corp. (NYSE:VFC)
streak 43 yrs | 5-yr growth rate 17.0% | yield 2.30%@ $64.42
payout 52% | debt 35% | moat wide | credit rating A
Dividend Champion VFC is a global leader in the design, manufacture, marketing and distribution of branded lifestyle apparel, footwear and accessories. The company owns powerful brands including The North Face, Vans, Timberland, Wrangler, Lee and Nautica. VFC was founded in 1899 and is headquartered in Greensboro, North Carolina. The stock trades near my fair value estimate of $64.11.
• Lazard Limited (NYSE:LAZ)
streak 8 yrs | 5-yr growth rate 22.0% | yield 3.63%@ $38.55
payout 19% | debt 87% | moat narrow | credit rating n/a
LAZ is a Bermuda-based holding company founded in 1848 in New Orleans. The company operates as a preeminent international financial advisory and asset management firm, serving corporations, governments, institutions, partnerships and high net-worth individuals in 41 cities across 26 countries. The stock trades at a discount of 33% to my fair value estimate of $51.10.
• Prudential Financial, Inc. (NYSE:PRU)
streak 7 yrs | 5-yr growth rate 16.2% | yield 3.84%@ $72.84
payout 23% | debt 71% | moat none | credit rating A
PRU is a financial services company, which, through its subsidiaries and affiliates, provides a range of financial products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. The company has more than $1 trillion of assets under management. PRU was founded in 1875 and is headquartered in Newark, New Jersey. The stock trades at a discount of 20% to my fair value estimate of $87.38.
• Magna International Inc. (NYSE:MGA)
streak 6 yrs | 5-yr growth rate 28.1% | yield 2.38%@ $41.97
payout 21% | debt 18% | moat none | credit rating A-
MGA is an automotive supplier with 305 manufacturing operations and 93 product development, engineering and sales centers in 29 countries. The company's product capabilities include producing body, chassis, interior, exterior, seating, powertrain, electronic, vision, closure and roof systems and modules, as well as vehicle engineering and contract manufacturing. The company was founded in 1957 and is headquartered in Aurora, Canada. MGA trades at a discount of 14% to my fair value estimate of $47.87.
Please note that the top 10 ranked stocks are candidates for further analysis, not recommendations.
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Disclosure: I am/we are long TROW,IBM.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.