Back in January, we took an in-depth look at three groups of Dividend Aristocrat stocks to show which ones grew their payouts the most over the past five years. Now is the time to follow up on other companies that have the potential to earn Aristocrat distinction.
Before we do this new stock screen, we need to define Aristocrats:
In all, there are 139 Dividend Aristocrats.
In January, we listed 15 Dividend Aristocrats that were the best income producers over the past five years.
The concept of income generation over the long term is an important one. An investor who is interested in stocks of companies that pay dividends may focus on high current yield (annual dividend payments divided by current share price). But a high current yield may indicate a lack of confidence that the company can continue paying high dividends.
You may benefit from an increase in dividends in the long run. For an updated example among the S&P 500 Dividend Aristocrats from a previous article, Automated Data Processing Inc. Consider ADP.,
If you had bought the stock five years ago on March 2, 2018 (a Friday), you would have paid $113.60 per share. At that time the annual dividend payout rate was $2.52 per share, for a yield of 2.22%. Fast-forward to March 3, 2023, and the share price had nearly doubled to $224.75. The company now pays $5 per share annually for a current yield of 2.22% — the same as five years ago. But now the dividend yield on your five-year-old shares is 4.40 per cent.
New Screen: Potential Dividend Aristocrats
In the comments below a previous Dividend Aristocrats article, a reader had the following suggestion: “Can you just screen companies that have a market cap > $8 billion and have increased their dividend payouts by 15% over the past 7yrs, 5yrs or What’s more growth than that, 3 years and 12 months? It will capture some of the companies that are not Dividend Aristocrats yet, but may be on their way to becoming one.”
To simplify this new screen, we only looked at five years of dividend growth. And to eliminate the distorted dividend growth rate for companies with very low payouts five years ago, we set a minimum trailing dividend yield of 1.00%.
For the new screen, we started with the S&P 1500 Composite Index and then made the following deductions using data provided by FactSet:
Here are the 20 remaining companies with the highest five-year compound annual growth rates (CAGR) for annual dividends:
| company | anchor | Five Year Dividend CAGR | Dividend Yield on Shares Bought Five Years Ago | dividend yield five years ago | current dividend yield | Price Variation – 5 Years | Total Return – 5 Years |
|
Tractor Supply Company |
TSCO |
30.71% |
6.42% |
1.68% |
1.79% |
258% |
285% |
|
MSCI Inc. class a |
MSCI |
29.43% |
3.85% |
1.06% |
1.03% |
274% |
293% |
|
Lam Research Corp. |
lrcx |
28.10% |
3.55% |
1.03% |
1.40% |
153% |
174% |
|
Monolithic Power Systems Inc. |
mpwr |
27.23% |
3.39% |
1.02% |
0.79% |
328% |
347% |
|
CDW Corporation |
cdw |
22.95% |
3.23% |
1.15% |
1.17% |
176% |
192% |
|
Moscow Corp. |
But |
22.10% |
2.81% |
1.04% |
2.16% |
31% |
41% |
|
Poole Corp. |
pool |
22.00% |
2.81% |
1.04% |
1.11% |
154% |
166% |
|
Broadcom Inc. |
average |
21.32% |
7.33% |
2.79% |
2.91% |
152% |
201% |
|
Raymond James Financial Inc. |
RJF |
20.30% |
2.74% |
1.09% |
1.56% |
76% |
90% |
|
Owens Corning |
oc |
19.88% |
2.61% |
1.05% |
2.05% |
27% |
38% |
|
East West Bancorp Inc. |
EWBC |
19.14% |
2.84% |
1.19% |
2.55% |
11% |
24% |
|
rexford industrial realty inc. |
rexr |
18.89% |
5.58% |
2.35% |
2.47% |
126% |
149% |
|
Invitation Homes Inc. |
invh |
18.77% |
4.73% |
2.00% |
3.27% |
45% |
61% |
|
steel dynamics inc. |
stld |
17.78% |
3.52% |
1.55% |
1.25% |
182% |
218% |
|
Kinder Morgan Inc. class p |
KMI |
17.29% |
6.89% |
3.11% |
6.29% |
10% |
47% |
|
UnitedHealth Group Incorporated |
uhhh |
17.08% |
2.93% |
1.33% |
1.38% |
113% |
129% |
|
Allegion Public Limited Company |
But |
16.47% |
2.19% |
1.02% |
1.57% |
40% |
48% |
|
Dollar General Corp. |
dg |
16.17% |
2.33% |
1.10% |
1.01% |
131% |
141% |
|
American Tower Corporation |
amt |
17.38% |
4.66% |
2.09% |
3.08% |
51% |
68% |
|
Kroger Company |
KR |
15.77% |
3.80% |
1.83% |
2.26% |
68% |
87% |
|
Source: FactSet, company filing. |
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Click on the tickers for more information on each company.
Read Tommy Kilgore’s detailed guide to a wealth of information for free on the Marketwatch quote page.
Topping the list with the highest five-year dividend CAGR is TSCO, a tractor supply company.,
You can see that the dividend yield was not very high five years ago at 1.68% and that for someone buying now the current yield would be only 1.79%. But look at how the dividend has grown. If you had held this stock since you bought it five years ago, the yield on your five-year-old shares would have been 6.42% and your share price would have increased by 258%.
Passing the stock screen doesn’t guarantee anything. If you see a company on the list that interests you, the next step is to do your own research and form your own opinion about each company’s business strategy and what you can expect from it for at least the next decade. and how many competitors expect the services to be delivered.
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Credit: www.marketwatch.com /