The Top-Ranked Dividend Champions
Summary
- This article presents the top-ranked Dividend Champions, based on DVK Quality Snapshots.
- I present tables listing key metrics, quality indicators, and fair value estimates.
- A downloadable spreadsheet is provided with fundamental and added value data.
- This is the first of three articles ranking the Dividend Champions, Contenders, and Challengers.
The article presents the top-ranked Dividend Champions, which are companies listed on U.S. exchanges that have consistently higher annual dividend payouts for 25 or more years. Subsequent articles will present the top-ranked Dividend Contenders (10 or more years) and Challengers (5 or more years).
I use DVK Quality Snapshots to assess the quality of dividend growth [DG] stocks. The system scores each of five quality indicators with 0-5 points to determine a quality score out of 25 points. To rank DG stocks, I sort them by quality scores and use tie-breaking metrics, including, in order, dividend safety, credit rating, and dividend yield.
As a self-directed dividend growth investor, I am motivated to find high-quality DG stocks trading at reasonable valuations. I regularly do quality assessments on different lists of DG stocks and share the results in articles on Seeking Alpha. These articles present key metrics of interest to dividend growth investors along with my fair value estimates. For reference, here are the most recent editions of some of these ranking articles:
- The Dividend Aristocrats Ranked By Quality Scores (Feb. 21, 2021)
- The Dividend Kings Ranked By Quality Score (Jan. 23, 2021)
- 10 Dividend Growth Stocks For February 2021 (monthly series)
Occasionally, I include a downloadable spreadsheet providing fundamental and added value data of ranked DG stocks. While these are snapshots in time, they do provide a good foundation for further analysis and for identifying candidates for due diligence research.
The Dividend Champions
Dividend Champions is a moniker coined by the late David Fish for stocks with dividend increase streaks of at least 25 years. He later added Dividend Contenders (10 or more years) and Dividend Challengers (5 or more years). The Dividend Champions list is now maintained by Justin Law.
We introduced Dividend Radar in May 2020 as another free resource of Dividend Champions, Contenders, and Challengers. Dividend Radar is automatically created and published every Friday as an Excel spreadsheet. It includes key metrics and fundamental data of interest to dividend growth investors, as well as up-to-date dividend growth rates, fair value estimates, and trailing total returns for all DG stocks. Since its introduction, Dividend Radar has received incredibly positive feedback and averages over 2,000 downloads per month.
The latest Dividend Radar (dated March 12, 2021) contains 765 stocks. There are 129 Dividend Champions, 314 Dividend Contenders, and 322 Dividend Challengers.
The 129 Dividend Champions have an average dividend increase streak of 40.1 years, an average dividend yield of 2.37%, an average 5-year dividend growth rate of 6.93%. The longest streak of 67 years belongs to American States Water Company (AWR), while the newest members with dividend streaks of 25 years are:
- Church & Dwight Co, Inc. (CHD)
- Canadian National Railway Company (CNI)
- The First of Long Island Corporation (FLIC)
- Bank OZK (OZK)
Thirty-three (about one quarter) of the Dividend Champions have dividend streaks of at least 50 years:
Below is a chart showing the sector distribution of the Dividend Champions:
Source: Created by the author
About 45% of Dividend Champions fall in the Financials and Industrials sectors!
In a previous article, I mentioned the merits of following a business cycle approach to sector investing and investing in sectors based on the likelihood that they will outperform or underperform. So it is useful also to consider the supersector distribution of the Dividend Champions:
Source: Created by the author
| Defensive Sectors (Consumer Staples, Health Care, Utilities) are not closely tied to the economy because companies in these sectors provide goods and services that are always in demand. Cyclical Sectors (Consumer Discretionary, Financials, Materials, Real Estate) are closely tied to the ups and downs of the economy. When the economy is thriving, companies in cyclical sectors do well because unemployment is low and wages increase. In downturns, though, companies in cyclical sectors tend to struggle as consumers are less confident about the future. Sensitive Sectors (Communication Services, Energy, Industrials, Information Technology) are sectors that ebb and flow with the overall economy but to a limited degree. Companies in these sectors are not immune to a poor economy, but they also may not be as severely impacted by economic downturns. |
I find it interesting that the Dividend Champions are dominated by stocks in the Cyclical Sectors. In contrast, the Dividend Aristocrats are about equally distributed between the Defensive and Cyclical Sectors, with a much smaller percentage of stocks (28%) falling in the Sensitive Sectors.
How I Rate and Rank Dividend Growth Stocks
I use DVK Quality Snapshots to assess the quality of DG stocks. The system employs five widely used quality indicators from independent sources and assigns 0-5 points to each quality indicator, for a maximum of 25 points:
- Value Line [VL] Safety Rank
- Value Line [VL] Financial Strength ratings
- Morningstar [M*] Economic Moat
- Standard & Poor's [S&P] Credit Ratings
- Simply Safe Dividends [SSD] Dividend Safety Scores
I love the simplicity of this system, and it does a remarkable job identifying high-quality stocks!
My rating system is a simple mapping of different quality score ranges. Ratings are Exceptional (25), Excellent (23-24), Fine (19-22), Decent (15-18), Poor (10-14), and Inferior (0-9). Furthermore, I distinguish between Investment Grade ratings for quality scores in the range 15-25, and Speculative Grade ratings for quality scores below 15.
DVK Quality Snapshots scoring system and my rating system |
To rank stocks, I sort them by descending quality scores and use the following tie-breaking metrics, in turn:
- SSD Dividend Safety Scores
- S&P Credit Ratings
- Dividend Yield
When two stocks with the same quality score have the same Dividend Safety Scores, I next compare their S&P Credit Ratings, ranking the one with the better Credit Rating higher. I rarely need to break ties with the Dividend Yield.
Identifying Candidates for Investment
Whenever I'm presented with a large number of DG stocks, my first inclination is to screen the stocks using various criteria. Doing so reduces the number of stocks to consider to a small subset matching my criteria. The Dividend Radar spreadsheet provides numerous fundamental and added value metrics to facilitate such a screening process and, conveniently, presents the Dividend Champions in a separate tab.
For this article, though, I decided to use DVK Quality Snapshots to assign a quality score to each Dividend Champion and screen for those rated Exceptional, Excellent, and Fine only (that is, Dividend Champions with quality scores in the range 19-25).
It turns out that 49 (or about 38%) of the Dividend Champions pass this quality screen. I own 23 of these stocks in my DivGro portfolio, so there are 26 other high-quality Dividend Champions I could consider for possible inclusion in my portfolio.
After applying the quality screen, I next consider each stock's valuation. The highest-quality DG stocks rarely trade at discounted valuations, so I'm willing to pay a bit of a premium price for such stocks. Here is a table showing my quality/valuation criteria:
| Rating | Quality Scores | Valuation |
| Exceptional | 25 | Allow a premium of up to 10% |
| Excellent | 23-24 | Allow a premium of up to 5% |
| Fine | 19-22 | Require fair value or below |
| Decent | 15-18 | Require a discount of at least 10% |
Stocks that pass my quality/valuation screen are candidates for investment. For candidates already in my portfolio, I favor adding to underweight positions, which are positions smaller than about 1% of total portfolio value. For candidates not in my portfolio, I prefer the ones likely to deliver annualized returns of at least 8%.
The Top-Ranked Dividend Champions
The following sections present the 49 Top-Ranked Dividend Champions ranked by quality score.
Each table presents key metrics of interest to dividend growth investors, along with quality indicators and my fair value estimates:
Yrs : years of consecutive dividend increases
Yield : the dividend yield for a recent Price
Qual : quality score according to DVK Quality Snapshots
5-Yr DGR : the 5-year compound annual dividend growth rate
CDN : Chowder Number, a popular metric for screening DG stocks
Fair Val. : my fair value estimate (see below)
Price : recent share price
(Disc.) Prem : discount or premium of Price to my fair value estimate
5-Yr TTR : the 5-year compound trailing total returns
I color-code the CDN column to indicate the likelihood that the stock will deliver annualized returns of at least 8%. Green means likely, yellow means less-likely, and red means unlikely. I consider green CDNs favorable.
To estimate fair value, I reference fair value estimates and price targets from several sources, including Morningstar and Finbox.io. Additionally, I estimate fair value using the 5-year average dividend yield of each stock using data from Portfolio Insight. With several estimates and targets available, I ignore the outliers (the lowest and highest values) and use the average of the median and mean of the remaining values as my fair value estimate.
Dividend Champions rated Exceptional
The first table contains the highest-quality Dividend Champions with perfect quality scores, having scored the maximum possible points for all quality indicators.
Please note that stocks I own are highlighted in the Ticker column.
| Rank | Company (Ticker) | Sector | Supersector |
| 1 | Johnson & Johnson (JNJ) | Health Care | Defensive |
| 2 | The Procter & Gamble Company (PG) | Consumer Staples | Defensive |
| 3 | Automatic Data Processing, Inc. (ADP) | Information Technology | Sensitive |
I own all three of the Dividend Champions rated Exceptional.
Only PG is underweight in my portfolio and I would need to add 94 shares to make my PG position a full-size position equivalent to 1% of total portfolio value.
For readers who don't own the stock, ADP is a good candidate to consider given its favorable CDN.
Dividend Champions rated Excellent
The next table contains high-quality Dividend Champions with quality scores of 23-24.
| Rank | Company (Ticker) | Sector | Supersector |
| 4 | Medtronic plc (MDT) | Health Care | Defensive |
| 5 | General Dynamics Corporation (GD) | Industrials | Sensitive |
| 6 | PepsiCo, Inc. (PEP) | Consumer Staples | Defensive |
| 7 | Colgate-Palmolive Company (CL) | Consumer Staples | Defensive |
| 8 | Stryker Corporation (SYK) | Health Care | Defensive |
| 9 | Walmart Inc. (WMT) | Consumer Staples | Defensive |
| 10 | Ecolab Inc. (ECL) | Materials | Cyclical |
| 11 | Air Products and Chemicals, Inc. (APD) | Materials | Cyclical |
| 12 | Illinois Tool Works Inc. (ITW) | Industrials | Sensitive |
| 13 | The Coca-Cola Company (KO) | Consumer Staples | Defensive |
| 14 | Emerson Electric Co. (EMR) | Industrials | Sensitive |
| 15 | 3M Company (MMM) | Industrials | Sensitive |
| 16 | Raytheon Technologies Corporation (RTX) | Industrials | Sensitive |
I own all but four of the Dividend Champions rated Excellent.
Of the stocks I own, ITW and SYK are trading above my quality/valuation threshold of a 5% premium. As for the other stocks in my portfolio, only APD (-40 shares) and RTX (-74 shares) are underweight.
None of the stocks I don't own interest me at this time.
ITW is the only stock with a favorable CDN, but it is trading above my quality/valuation threshold for stocks rated Excellent.
Dividend Champions rated Fine
The final table contains quality Dividend Champions with quality scores of 19-22.
CDNU: A special rule lowers the CDN for Utilities sector stocks yielding at least 4%
| Rank | Company (Ticker) | Sector | Supersector |
| 17 | W.W. Grainger, Inc. (GWW) | Industrials | Sensitive |
| 18 | Hormel Foods Corporation (HRL) | Consumer Staples | Defensive |
| 19 | Chubb Limited (CB) | Financials | Cyclical |
| 20 | NextEra Energy, Inc. (NEE) | Utilities | Defensive |
| 21 | Brown-Forman Corporation (BFB) | Consumer Staples | Defensive |
| 22 | Roper Technologies, Inc. (ROP) | Industrials | Sensitive |
| 23 | Canadian National Railway Company (CNI) | Industrials | Sensitive |
| 24 | Atmos Energy Corporation (ATO) | Utilities | Defensive |
| 25 | T. Rowe Price Group, Inc. (TROW) | Financials | Cyclical |
| 26 | Caterpillar Inc. (CAT) | Industrials | Sensitive |
| 27 | Lowe's Companies, Inc. (LOW) | Consumer Discretionary | Cyclical |
| 28 | Becton, Dickinson and Company (BDX) | Health Care | Defensive |
| 29 | Kimberly-Clark Corporation (KMB) | Consumer Staples | Defensive |
| 30 | McDonald's Corporation (MCD) | Consumer Discretionary | Cyclical |
| 31 | Commerce Bancshares, Inc. (OTC:CBSH) | Financials | Cyclical |
| 32 | Cintas Corporation (CTAS) | Industrials | Sensitive |
| 33 | PPG Industries, Inc. (PPG) | Materials | Cyclical |
| 34 | Dover Corporation (DOV) | Industrials | Sensitive |
| 35 | The Sherwin-Williams Company (SHW) | Materials | Cyclical |
| 36 | The Clorox Company (CLX) | Consumer Staples | Defensive |
| 37 | AT&T Inc. (T) | Communication Services | Sensitive |
| 38 | Brown & Brown, Inc. (BRO) | Financials | Cyclical |
| 39 | American States Water Company (AWR) | Utilities | Defensive |
| 40 | Consolidated Edison, Inc. (ED) | Utilities | Defensive |
| 41 | Franklin Resources, Inc. (BEN) | Financials | Cyclical |
| 42 | International Business Machines Corporation (IBM) | Information Technology | Sensitive |
| 43 | Church & Dwight Co., Inc. (CHD) | Consumer Staples | Defensive |
| 44 | Carlisle Companies Incorporated (CSL) | Industrials | Sensitive |
| 45 | SEI Investments Company (SEIC) | Financials | Cyclical |
| 46 | Expeditors International of Washington, Inc. (EXPD) | Industrials | Sensitive |
| 47 | Lancaster Colony Corporation (LANC) | Consumer Staples | Defensive |
| 48 | Archer-Daniels-Midland Company (ADM) | Consumer Staples | Defensive |
| 49 | Parker-Hannifin Corporation (PH) | Industrials | Sensitive |
I own eleven of the Dividend Champions rated Fine.
Of the stocks I own, ADM, CNI, HRL, NEE, and MCD are trading above my quality/valuation threshold at fair value. As for the other stocks in my portfolio, only BEN (-461 shares) is underweight.
Of the stocks I don't own, three stocks with favorable CDNs are discounted, CSL, ED, and ROP. Of the three, ED looks most interesting to me at a glance because I want to increase my exposure in the Defensive supersectors, and ED yields 4.54%. CSL and, especially ROP, are low-yielding stocks with impressive 5-year DGRs, so they should interest dividend growth investors that focus more on growth.
For readers, I recommend considering the discounted stocks with favorable CDNs: BEN, CSL, ED, LOW, and ROP.
Dividend Champions: Additional Screens
We can use some of Portfolio Insight's screening features to identify stocks with compelling metrics. I created a watch list called Quality Champions containing the 49 top-ranked Dividend Champions.
First, let's consider dividend yield and dividend growth. I like to hold a good mix of higher-yielding and higher DGR stocks in my portfolio, but it is rare to see single stocks offering both. Consider the dividend quadrant, which compares the dividend yield to the 10-year dividend growth rate for all Quality Champions:
Source: Portfolio Insight
Only three Dividend Champions, BEN, IBM, and MMM, fall into the high yield/high growth quadrant.
- Defensive: none
- Cyclical: BEN
- Sensitive: IBM, MMM
All three stocks are discounted, but only BEN has a favorable CDN.
Chowder Number
Another way to look at high yield and high growth stocks is using the Chowder Number or CDN, which sums the current yield and 5-year dividend growth rate:
- Defensive: HRL
- Cyclical: BEN, LOW, SHW
- Sensitive: CTAS, ITW,ROP
I like using the CDN as a guide, often favoring stocks whose CDNs are colored green in my summary tables. Such stocks are likely to deliver annualized returns of at least 8%, provided they continue to increase their dividends at similar rates.
BEN, LOW, and ROP have favorable CDNs and currently are discounted.
Dividend Yield
The top quartile of the highest-yielding stocks yields at least 2.5%. The chart presents dividend yields through December 2020. Meanwhile, some recent price actions have changed the relative positions of the top-yielding stocks. Here are the seven top-yielding stocks sorted by current Yield:
- Defensive: ED, KMB, KO
- Cyclical: BEN
- Sensitive: IBM, MMM, T
With the exception of KO, the highest-yielding stocks all trade at discounted valuations. T tops the list and has been the top-yielding stock among the Quality Champions since 2016:
Source: Portfolio Insight
Except for BEN, I'm not really impressed by the 5-year DGRs of these high-yielding stocks. ED yields 4.37% and as a Utilities sector stock, it benefits from an exception in the Chowder rule so that its CDN of 8 is considered favorable.
BEN, LOW, and ROP have favorable CDNs and are currently discounted.
Dividend Growth Rate
The top quartile of stocks has 5-year DGRs of at least 10.73%. Here are the top seven stocks sorted by 5-Yr DGR:
- Defensive: HRL
- Cyclical: LOW, SHW
- Sensitive: CTAS, ITW, ROP
CSL, LOW, and ROP have high 5-year DGRs and currently are discounted.
Trailing Total Returns
The top quartile of stocks has 5-year compound trailing total returns of at least 18.41%. Here are the top seven stocks sorted by 5-Yr TTR:
- Defensive: BRO, NEE, SYK
- Cyclical: SHW
- Sensitive: CAT, CTAS, PH
None of these stocks are discounted right now.
Discount to Fair Value
Below is a chart showing the P/E-based fair value estimates of the Quality Champions:
As mentioned earlier, I estimate fair value by referencing fair value estimates and price targets from multiple sources. It is interesting to compare my fair value estimates with the P/E-based fair value estimates above. There is general correspondence, though Portfolio Insight considers fair value to be a range rather than a specific value.
- Defensive: ATO, ED
- Cyclical: BEN, SEIC
- Sensitive: GD, IBM, T
Stocks available at deep discounts need special scrutiny as there may be good reasons for their undervaluations. This is particularly true for stocks with poor historical performance. ATO and ED, both Utilities sector stocks, have the best 5-year TTRs of these discounted stocks.
Dividend Safety
- Defensive: HRL, JNJ, MDT, NEE, PG
- Cyclical: CB
- Sensitive: GWW
Only two of the safest stocks offer favorable CDNs, HRL and NEE, and only CB is discounted.
Concluding Remarks
DVK Quality Snapshots provide a convenient and effective method to assess the quality of dividend growth stocks. I ranked 129 Dividend Champions and presented the 49 top-ranked Dividend Champions with quality scores in the range of 19-25 (those rated Exceptional, Excellent, and Fine). These truly are high-quality stocks!
I've highlighted several stocks trading at favorable valuations and offering compelling metrics, particularly those likely to deliver annualized returns of at least 8%, as indicated by favorable CDNs:
- Defensive: ED
- Cyclical: BEN, LOW
- Sensitive: ADP, CSL, ROP
I own ADP, BEN, and LOW.
As always, I encourage readers to do their own due diligence before investing.
Thanks for reading, and happy investing!
I'm providing a downloadable spreadsheet with fundamental and added value metrics for the Top-Ranked Dividend Champions. The spreadsheet includes the data presented in this article but also data available to Portfolio Insight subscribers. I hope readers would find this snapshot of fundamental and added value metrics useful in analyzing the Top-Ranked Dividend Champions.
Access a Google spreadsheet of the Top-Ranked Dividend Champions
To copy, sign in with a Google account and select File | Make a Copy
This article was written by
Disclosure: I am/we are long JNJ, PG, ADP, MDT, GD, PEP, SYK, APD, ITW, KO, MMM, RTX, HRL, CB, NEE, CNI, ATO, TROW, LOOW, MCD, T, BEN, IBM, ADM. 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.