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Stocks: 8 Dividend Champions to Consider Now

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Dividend stocks are losing value. Is it a good time to buy?

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Dividend stocks trade inversely with bonds -- meaning that when bond yields are down, many investors switch their assets over to dividend stocks, which provide some of the security of bonds with a much better return.

Even though bond yields have not yet begun to go up, there is much speculation that they will, prompting many investors to start moving their assets out of a lot of the highest yielding dividend stocks.

The major indices that track dividend stocks are lagging behind the S&P 500 (INDEXSP:.INX) as a whole. This prompts contrarians to wonder: Is now the time to start looking for dividend stocks to add to your portfolio?

One of the best places to start looking for dividend stocks is the DRiP list of dividend champions. It keeps an actively updated index of all the dividend stocks that have increased their dividends consecutively each year for at least 25 years. 

This means that their dividend payments, and keeping their shareholders happy, is a priority. However it's definitely not the only metric you want to use, especially if you expect the bond market to continue to recover. The key is to find stocks that might still be able to support a higher price even as dividends become far less important.

To do that we decided to look for dividend champions experiencing an encouraging Dupont Breakdown. 

One of the most important metrics to use to evaluate stocks is return on equity (ROE). However that statistic is easily manipulated and can be driven up by borrowing money. To make the number more useful, the Dupont Corporation (NYSE:DD) broke the number down to try and get a clearer picture of what is producing a higher ROE. 

The result is the Dupont Breakdown, which compares three things: the profit margins of the most recent quarter vs. the profits year over year (growing more profitable), the ratio of sales to assets (selling more of its stuff), and the ratio of assets to equity (more of its stuff is money).

We screened the 100 or so dividend champions that trade on US exchanges and found eight that also exhibit an encouraging Dupont Breakdown. 


Click on the interactive chart to view data over time. 

1. 3M Co. (NYSE:MMM): Operates as a diversified technology company worldwide. Market cap at $88.36B, most recent closing price at $132.20.

MRQ net profit margin at 14.57% vs. 13.42% y/y.

MRQ sales/assets at 0.226 vs. 0.218 y/y.

MRQ assets/equity at 1.917 vs. 1.928 y/y.  
 
2. Bemis Company, Inc. (NYSE:BMS): Bemis Company, Inc. manufactures and sells flexible packaging products and pressure sensitive materials in the United States, Canada, Mexico, South America, Europe, and Asia. Market cap at $3.97B, most recent closing price at $38.65.

MRQ net profit margin at 4.61% vs. 3.25% y/y.

MRQ sales/assets at 0.297 vs. 0.295 y/y.

MRQ assets/equity at 2.44 vs. 2.551 y/y.  
 
3. Dover Corp. (NYSE:DOV): Dover Corporation manufactures and sells industrial products and components, and consumables. Market cap at $15.21B, most recent closing price at $89.47.

MRQ net profit margin at 8.78% vs. 7.94% y/y.

MRQ sales/assets at 0.204 vs. 0.193 y/y.

MRQ assets/equity at 2.016 vs. 2.123 y/y.
 
4. Franklin Resources Inc. (NYSE:BEN): Provides its services to individuals, institutions, pension plans, trusts, and partnerships. Market cap at $33.62B, most recent closing price at $53.52.

MRQ net profit margin at 28.62% vs. 27.14% y/y.

MRQ sales/assets at 0.133 vs. 0.132 y/y.

MRQ assets/equity at 1.514 vs. 1.604 y/y. 
 
5. RLI Corp. (NYSE:RLI): Through its subsidiaries, RLI Corp underwrites property and casualty insurance primarily in the United States. Market cap at $1.85B, most recent closing price at $42.28.

MRQ net profit margin at 18.26% vs. 14.64% y/y.

MRQ sales/assets at 0.068 vs. 0.065 y/y.

MRQ assets/equity at 3.306 vs. 3.321 y/y.
 
6. Sigma-Aldrich Corporation (NASDAQ:SIAL): Develops, manufactures, purchases, and distributes a range of chemicals, biochemicals, and equipment worldwide. Market cap at $11.19B, most recent closing price at $93.26.

MRQ net profit margin at 19.15% vs. 17.71% y/y.

MRQ sales/assets at 0.18 vs. 0.171 y/y.

MRQ assets/equity at 1.314 vs. 1.5 y/y. 
 
7. Vectren Corporation (NYSE:VVC): Provides energy delivery services to residential, commercial, and industrial and other customers in Indiana and west central Ohio. Market cap at $3.12B, most recent closing price at $37.92.

MRQ net profit margin at 7.32% vs. 6.64% y/y.

MRQ sales/assets at 0.133 vs. 0.127 y/y.

MRQ assets/equity at 3.283 vs. 3.335 y/y.  
 
8. Walgreen Co. (NYSE:WAG): Engages in the operation of a chain of drugstores in the United States. Market cap at $63.15B, most recent closing price at $66.52.

MRQ net profit margin at 3.79% vs. 2.39% y/y.

MRQ sales/assets at 0.502 vs. 0.491 y/y.

MRQ assets/equity at 1.822 vs. 1.918 y/y. 
 
Dividend yields sourced from Zacks Investment Research, all other data sourced from Finivz.

Editor's note: This story by James Dennin originally appeared on Kapitall.

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No positions in stocks mentioned.
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