Evaluating the S&P 500 Dividend Aristocrats: Cardinal Health, Inc. (CAH), Emerson Electric Co. (EMR) and More

Page 1 of 2

Over the past year, I (along with many other investors) have recognized the awesome beauty of dividend stocks. Once considered the stodgy old men of the investing world, dividend-paying companies have become young and hip, and very, very attractive.

One of the most famous lists of high-quality dividend-paying companies is the S&P 500 list of Dividend Aristocrats, defined as large-cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for the past 25 years.

Cardinal Health, Inc.This time frame pretty much guarantees a stable, dependable company, one that has successfully weathered the ups and downs of the last quarter-decade. These companies made it through the 2008 fiscal crisis without having to cut their distributions, which is a great accomplishment.

In the past few months, while I have been building my own Dividend Portfolio, I have reviewed dozens of companies, a number of which are included in the Dividend Aristocrat list. In this article, I will examine five that I have not previously analyzed.

I review the companies on seven different criteria: yield, number of years paying and raising dividends, 5-year Dividend Growth Rate (DGR), 5-year projected Earnings Growth Rate (EGR), total return for the past twelve months, PE and payout ratio. I feel that this selection covers the past dividend-paying history, the potential future earnings growth, and the valuation of the company.

I constructed a rating system that awards points for each of the previous named criteria. A “perfect” score would be 28 points, with 4 points awarded in all seven categories. The hard thresholds that I utilize are a 10-year dividend paying history, and a 3% minimum yield. A company which obtains an 18-20 point rating generally is an automatic choice for the portfolio. One scoring 15-17 merits further consideration and watching for a change in dividend metrics, and anything scoring a 14 or below is rejected.

The top companies of the Dividend Aristocrats, in terms of market cap, are Abbvie (which is already included in my Dividend Portfolio), Lowe’s Companies (which I recently reviewed and rejected), McGraw-Hill (recently reviewed and rejected), Medtronic (recently reviewed and rejected), Nucor Corporation (NYSE:NUE), Leggett & Platt, Inc. (NYSE:LEG), Pentair (rejected for a low dividend yield of 1.7%), W.W. Grainger (recently reviewed and rejected), Family Dollar Stores (rejected for low yield of 1.4%), Emerson Electric Co. (NYSE:EMR), Cardinal Health, Inc. (NYSE:CAH) and Stanley Black & Decker, Inc. (NYSE:SWK).

The first company is Nucor Corporation (NYSE:NUE), a steel company. It is currently trading at $47 per share and yields 3.1%. The company has been paying and raising dividends consistently for 40 years, and its 5-year Dividend Growth Rate (DGR) is 18.3%. Its PE is a high 29.9, and its twelve-month total return is 14.4%. The payout ratio is 92%. The company is currently trading at its 52-week high, and is up 7% from last year.

The 21 analysts who cover the company rate the stock a 2.2 (1.0 = Strong Buy, 5.0 = Sell). It has 5 Strong Buys, 8 Buys, 7 Holds, and 1 Underperform. They have set a one-year target price on the company of $47.46. Within the Motley Fool community, NUE is a four-star CAPS pick, with 2,115 Bulls and 87 Bears (95% positive sentiment).

Nucor scores a 13 on my ratings system; I reject the company based on its high payout ratio, high PE, and mediocre recent and future growth metrics.

Next is Leggett & Platt, Inc. (NYSE:LEG), a steel company. It is currently trading at $29 per share and yields 3.9%. The company has been paying and raising dividends consistently for 41 years, and its 5-year DGR is 8.3%. Its PE is a high 23.6, and its twelve-month total return is 31.6%. The payout ratio is high at 90%. The company is currently trading at its 52-week high, and is up 34% from last year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!