The list of dividend champions includes companies which have managed to increase dividends every single year for at least 25 years in a row. This is a very rare occurrence, and is indicative of a company that has a unique business model that withstood the test of time. Only a company with a unique set of competitive advantages can manage to grow the business, maintain its dominant industry position, and shower shareholders with more cash every single year for at least a quarter of a century. As of the time of this writing, there are 109 such businesses in the US. The list of Dividend Champions is maintained by David Fish, who is a true superhero for ordinary dividend investors.

After obtaining the list every month, I try to get it to a more manageable level by weeding out companies whose dividends are at risk.

dividend champions
Photo by stevepb (Pixabay)

My screening criteria on the list of dividend champions includes:

  1. P/E ratio at or below 20
  2. Dividend Payout Ratio below 60%
  3. EPS growth over the past decade
  4. Dividend Growth exceeding 3%/year

The companies which met this criteria include:

Name Symbol Years Annual Dividend Increases P/E Ratio Dividend Yield Dividend Per Share Earnings Per Share Dividend Payout Ratio 10 year Dividend Growth Stock Price
AFLAC Inc. AFL 34 11.21 2.39%  $    1.72  $    6.42 27% 11.68%  71.99
Chesapeake Financial Shares CPKF 25 13.17 2.22%  $    0.50  $    1.71 29% 8.19%  22.50
T. Rowe Price Group TROW 31 14.28 3.36%  $    2.28  $    4.75 48% 14.45%  67.83
Wal-Mart Stores Inc. WMT 44 15.89 2.93%  $    2.04  $    4.38 47% 11.80%   69.61
S&P Global Inc. SPGI 44 16.33 1.26%  $    1.64  $    7.94 21% 7.09%  129.69
Leggett & Platt Inc. LEG 45 18.17 2.56%  $    1.28  $    2.41 53% 6.86%    50.09
Sonoco Products Co. SON 34 18.98 2.78%  $    1.48  $    2.81 53% 4.28% 53.32
Bemis Company BMS 34 19.66 2.46%  $    1.20  $    2.48 48% 4.32%  48.75
General Dynamics GD 25 19.69 1.79%  $    3.36  $    9.52 35% 12.81% 187.52
Stanley Black & Decker SWK 49 20.09 1.93%  $    2.20  $    6.51 34% 6.71% 130.80
Genuine Parts Co. GPC 61 20.23 2.71%  $    2.63  $    4.63 57% 6.92%  92.84
Tompkins Financial Corp. TMP 30 20.53 2.24%  $    1.80  $    3.91 46% 5.45%    80.26
Eaton Vance Corp. EV 36 20.63 2.50%  $    1.12  $    2.15 52% 9.85%  44.35
1st Source Corp. SRCE 29 20.75 1.60%  $    0.72  $    2.22 32% 4.01%   46.00

As usual, this list is not a recommendation to buy or sell anything. The next step of the process is evaluating the fundamental trends in every company listed above, and making a determination on whether to buy anything or pass and wait for another opportunity.

Building a diversified portfolio takes time, effort, and a large dose of patience, persistence and perseverance. It involves looking for companies to buy, and investing regularly. The number and quality of companies available for sale vary from month to month. If you build your dividend machine slowly over time, you will be able to achieve diversity in number of securities and diversify over time.

The portfolio weights for various holdings will vary over time. In the initial stage, I would try to weight each individual position equally. Over time, changes in prices and availability of good values will affect the relative portfolio weights. As I try to add money each month however, I have to make decision about not adding money to overweight positions, or initiating new positions in new dividend growth companies. For example, I have an above average weight in Aflac. As a result, I would not be buying Aflac, but may focus my attention on other companies on the list.

In the next stage of the game, winning dividend investors focus on the dividend income, and ignore the manic-depressive Mr Market. The Market is a giant distraction, whose mood swings need to be ignored.

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Article by Dividend Growth Investor