Screening The Dividend Champions List For Bargains

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Includes: ADM, AFL, BDX, CB, CBSH, CBU, CFR, CPKF, CSL, CSVI, DOV, EFSI, EV, GD, LOW, MKC, MO, PPG, SCL, SWK, TGT, TROW, UGI, UMBF, WBA
by: Dividend Growth Investor

Summary

As part of my monthly process, I ran the screen of dividend champions to identify bargains.

I discuss the criteria used and screening process to go through.

I present 22 attractively valued dividend champions for further research.

I ran my screen against the list of dividend champions from June 2018, in order to identify bargains. The list of dividend champions includes companies that have managed to increase dividends to shareholders for at least 25 years in a row. The dividend champions list is more comprehensive than the list of dividend aristocrats, which is why I prefer to use it for my investing process. The criteria used to screen the list of dividend champions are listed below:

1) A trailing P/E ratio below 20

2) A dividend payout ratio below 60%

3) A ten year dividend growth of at least 3%/year

4) A history of earnings growth over the past decade

5) A 25 year streak annual of dividend increases ( being a dividend champion meets this requirement automatically)

The process of screening is fairly straightforward. The first step involves creating a portfolio in Yahoo Finance, which includes the dividend champions from the latest update.

The second step involves creating a custom view, which allows you to see the ratios that are most important for you. In my case, I look for price, prospective dividend and earnings. I used trailing earnings per share for this screen, but I usually use forward earnings in order to account for one-time accounting items distorting short-term results. For example, my screen excluded Becton Dickinson (BDX) since it was showing to be having negative earnings ( caused by one-time items). But a review using forward earnings would have included it for potential screening. Trailing earnings are automatically populated, but for some reason I have to manually look for forward earnings for each company individually, because their “Forward Earnings” column shows the earnings for the year after next year. This is way too forward for me.

The third step involves copying and pasting the information from the list into an excel file. Unfortunately, Yahoo doesn’t let me download the information with my custom view. It only lets me download generic information such as stock symbol, last price, daily trading range and volume. These are not as helpful for me – which is why I have to copy and paste in excel. The fourth step involves calculating the payout ratio, populating the ten year dividend growth rates from a custom spreadsheet where I keep information. I also review the ten year trends in fundamentals such as earnings. You can do that using any of the dividend investing resources I have outlined in a previous article. This is the step that is the most subjective. In this step I eliminated a few companies such as Archer Daniels Midland (ADM) because they had failed to grow earnings per share over the past decade. In addition, I removed McCormick & Co (MKC) because the trailing P/E was artificially lower because trailing EPS were juiced up by one-time events; the forward earnings painted a stock that is overvalued at the time.

As a result of the screen, I came up with a list of the following 22 dividend champions for further research:

Company Name

Symbol

Trailing P/E

Forward Annual Div Yield

Dividend Payout Ratio

Last Price

Forward Annual Div Rate

10 year Annual Dividend Growth

5 year Annual Dividend Growth

AFLAC Inc.

(AFL)

7.19

2.35%

17%

$ 42.91

$ 1.04

8.1%

5.4%

Chubb Limited

(CB)

15.8

2.33%

36%

$ 129.19

$ 2.92

10.4%

7.8%

Commerce Bancshares

(CBSH)

20.59

1.45%

30%

$ 65.24

$ 0.94

4.4%

5.3%

Community Bank System

(CBU)

19.11

2.30%

42%

$ 61.58

$ 1.36

4.8%

4.2%

Cullen/Frost Bankers

(CFR)

18.66

2.37%

46%

$ 109.03

$ 2.68

3.9%

3.4%

Chesapeake Financial Shares

(OTCQB:CPKF)

12.69

1.96%

25%

$ 28.45

$ 0.56

7.7%

6.3%

Carlisle Companies

(CSL)

11.59

1.37%

15%

$ 112.30

$ 1.48

9.9%

13.6%

Computer Services Inc.

(OTCQX:CSVI)

17.82

2.90%

52%

$ 49.55

$ 1.44

15.1%

17.4%

Dover Corp.

(DOV)

14.87

2.59%

38%

$ 72.90

$ 1.88

11.0%

10.4%

Eagle Financial Services

(OTCQX:EFSI)

15.95

2.44%

39%

$ 37.95

$ 0.92

3.2%

3.8%

Eaton Vance Corp.

(EV)

19.62

2.38%

46%

$ 52.61

$ 1.24

8.5%

8.1%

General Dynamics

(GD)

19.41

2.00%

38%

$ 188.84

$ 3.72

11.5%

10.4%

Lowe's Companies

(LOW)

20.95

1.95%

42%

$ 96.14

$ 1.92

19.3%

20.4%

Altria Group Inc.

(MO)

10.41

4.93%

50%

$ 58.29

$ 2.80

11.3%

8.3%

PPG Industries Inc.

(PPG)

16.56

1.75%

29%

$ 103.00

$ 1.80

5.2%

7.8%

Stepan Company

(SCL)

20.63

1.15%

23%

$ 79.64

$ 0.90

7.4%

7.7%

Stanley Black & Decker

(SWK)

20.32

1.90%

38%

$ 133.14

$ 2.52

7.1%

6.1%

Target Corp.

(TGT)

14.4

3.45%

47%

$ 76.79

$ 2.48

16.7%

13.1%

T. Rowe Price Group

(TROW)

18.62

2.42%

45%

$ 115.50

$ 2.80

12.9%

10.9%

UGI Corp.

(UGI)

15.26

2.00%

29%

$ 53.93

$ 1.04

7.3%

6.6%

UMB Financial Corp.

(UMBF)

14.93

1.52%

22%

$ 77.76

$ 1.16

6.4%

4.5%

Walgreens Boots Alliance Inc.

(WBA)

14.9

2.93%

41%

$ 63.30

$ 1.76

16.2%

9.2%

This is the process I use to find promising dividend growth stocks. Of course, this list is not an automatic buy recommendation. It is just a list of stocks for further research.

In conclusion, today I shared with you the process I use to screen the list for dividend champions every month. This includes the criteria used, as well as how I do the actual screening. I find companies for further research to add to my dividend portfolio this way.

Happy Investing and Thanks for Reading!

Disclosure: I am/we are long ADM, AFL, BDX, CB, EV, GD, LOW, MKC, MO, TFT, TROW, WBA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.