Dividend growth investing is a very popular approach that can fit within the ModernGraham methods. We will look at companiesthat have grown their dividends annually for at least the last 20 years.
For all 737 companies covered by ModernGraham, I track the number of years a company has grown its dividend and provide that information in my individual company valuations.
Out of the 737 companies, only 66 have grown dividends annually for at least the last 20 years. Here is an overview of those companies:
The Elite
The following companies have been rated as undervalued and are suitable for either the Defensive Investor or the Enterprising Investor:
Aflac qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $4.72 in 2012 to an estimated $6.22 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.36% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Aflac revealed the company was trading below its Graham Number of $87.98. The company pays a dividend of $1.64 per share for a yield of 2.3%, putting it among the best dividend-paying stocks today. Its PEmg (price over earnings per share) was 11.22, below the industry average of 18.78, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation)
Cintas Corp. (CTAS, Financial)
Cintas is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and high PEmg and price-book (P/B) ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $2.07 in 2013 to an estimated $4.36 for 2017. This level of demonstrated earnings growth outpaces the market's implied estimate of 8.06% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price. (See the full valuation)
T. Rowe Price Group Inc. (TROW, Financial)
T. Rowe Price Group qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high P/B ratio. The Enterprising Investor has no initial concerns. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $2.75 in 2012 to an estimated $4.22 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.89% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into T. Rowe Price Group revealed the company was trading above its Graham Number of $41.69. The company pays a dividend of $2.12 per share for a yield of 3.1%, putting it among the best dividend-paying stocks today. Its PEmg was 16.27, below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of negative seven cents. (See the full valuation)
United Technologies Corp. (UTX, Financial)
United Technologies qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be undervalued after growing its EPSmg from $5.17 in 2012 to an estimated $7.65 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.29% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price. (See the full valuation)
The Good
The following companies have been rated as fairly valued and are suitable for either the Defensive Investor or the Enterprising Investor:
A. O. Smith Corp. (AOS, Financial)
A. O. Smith is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and P/B ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $1.9 in 2012 to an estimated $2.82 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 4.47% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value below the price. (See the full valuation)
Franklin Resources Inc. (BEN, Financial)
Franklin Resources qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $2.5 in 2012 to an estimated $3.2 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 2.18% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Franklin Resources revealed the company was trading above its Graham Number of $35.55. The company pays a dividend of 69 cents per share for a yield of 1.9%. Its PEmg was 11.51, below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its NCAV of $14.41. (See the full valuation)
Cincinnati Financial Corp. (CINF, Financial)
Cincinnati Financial is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last 10 years and the high PEmg ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $2.12 in 2012 to an estimated $3.21 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 6.36% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)
Hormel Foods Corp. (HRL, Financial)
Hormel Foods is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and high PEmg and P/B ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from 81 cents in 2012 to an estimated $1.29 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 9.9% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Hormel Foods revealed the company was trading above its Graham Number of $17.33. The company pays a dividend of 56 cents per share for a yield of 1.4%. Its PEmg was 29.96, below the industry average of 30.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its NCAV of three cents. (See the full valuation)
Leggett & Platt Inc. (LEG, Financial)
Leggett & Platt is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last 10 years and the high PEmg and P/B ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $1.21 in 2012 to an estimated $1.93 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 9.31% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Leggett & Platt revealed the company was trading above its Graham Number of $21.85. The company pays a dividend of $1.3 per share for a yield of 2.5%, putting it among the best dividend-paying stocks today. Its PEmg was 27.11, below the industry average of 27.31, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its NCAV of $-4.2. (See the full valuation)
People's United Financial Inc. (PBCT, Financial)
People's United Financial qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from 51 cents in 2012 to an estimated 83 cents for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 7.13% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)
Ross Stores Inc. (ROST, Financial)
Ross Stores is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and high PEmg and P/B ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $1.36 in 2013 to an estimated $2.35 for 2017. This level of demonstrated earnings growth supports the market's implied estimate of 7.44% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)
VF Corp. (VFC)
VF Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and high PEmg and P/B ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for valuation, the company appears to be fairly valued after growing its EPSmg from $1.83 in 2012 to an estimated $2.72 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 7.2% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)
The Full List
For the investor type, a "D" indicates the company is suitable for the Defensive Investor, an "E" indicates the company is suitable for the Enterprising Investor and an "S" indicates the company is considered speculative at this time.
| Ticker | Name with Link | Investor Type | Latest Valuation Date | MG Value | Recent Price | Price as a percent of Value | PEmg Ratio | Div. Yield |
| ADM | Archer Daniels Midland Co. | E | 1/3/2017 | --- | $44.69 | --- | --- | 2.64% |
| ADP | Automatic Data Processing | E | 11/20/2016 | --- | $99.68 | --- | --- | 2.13% |
| AFL | Aflac Inc. | D | 12/19/2016 | --- | $71.10 | --- | --- | 2.31% |
| ALB | Albemarle Corp. | S | 8/25/2016 | --- | $91.92 | --- | --- | 1.29% |
| AOS | A. O. Smith Corp. | E | 6/11/2016 | --- | $49.59 | --- | --- | 1.63% |
| APD | Air Products & Chemicals Inc. | S | 1/27/2017 | --- | $141.50 | --- | --- | 2.40% |
| BCR | C R Bard Inc. | E | 8/25/2016 | --- | $242.41 | --- | --- | 0.40% |
| BDX | Becton Dickinson and Co. | S | 1/8/2017 | --- | $180.90 | --- | --- | 1.46% |
| BEN | Franklin Resources Inc. | D | 8/21/2016 | --- | $42.53 | --- | --- | 1.62% |
| BF.B | Brown-Forman Corp. | S | 2/2/2017 | --- | $48.20 | --- | --- | 1.41% |
| BMS | Bemis Company Inc. | E | 7/1/2016 | --- | $48.62 | --- | --- | 2.32% |
| CAH | Cardinal Health Inc. | S | 7/3/2016 | --- | $80.71 | --- | --- | 1.92% |
| CFR | Cullen/Frost Bankers Inc. | E | 12/8/2016 | --- | $94.12 | --- | --- | 2.27% |
| CHRW | C.H. Robinson Worldwide Inc. | S | 8/29/2016 | --- | $79.06 | --- | --- | 2.11% |
| CINF | Cincinnati Financial Corp. | E | 5/21/2016 | --- | $72.67 | --- | --- | 2.56% |
| CL | Colgate-Palmolive Co. | S | 1/27/2016 | --- | $71.98 | --- | --- | 2.11% |
| CLC | CLARCOR Inc. | E | 1/8/2017 | --- | $82.93 | --- | --- | 1.06% |
| CLX | Clorox Co. | S | 1/28/2017 | --- | $133.71 | --- | --- | 2.33% |
| CTAS | Cintas Corp. | E | 7/21/2016 | --- | $118.61 | --- | --- | 0.89% |
| CVX | Chevron Corp. | S | 8/18/2016 | --- | $110.33 | --- | --- | 3.88% |
| DOV | Dover Corp. | D | 7/8/2016 | --- | $79.94 | --- | --- | 2.08% |
| ECL | Ecolab Inc. | S | 6/26/2016 | --- | $123.95 | --- | --- | 1.10% |
| ED | Consolidated Edison Inc. | S | 8/21/2016 | --- | $73.50 | --- | --- | 3.59% |
| EMR | Emerson Electric Co. | S | 2/12/2016 | --- | $61.89 | --- | --- | 3.05% |
| EPD | Enterprise Products Partners L.P. | S | 8/27/2016 | --- | $28.86 | --- | --- | 5.37% |
| ESS | Essex Property Trust Inc. | S | 10/9/2015 | --- | $228.10 | --- | --- | 2.60% |
| EXPD | Expeditors International of Washington | E | 6/25/2016 | --- | $56.50 | --- | --- | 1.27% |
| GPC | Genuine Parts Co. | E | 7/8/2016 | --- | $100.67 | --- | --- | 2.48% |
| GWW | W W Grainger Inc. | E | 1/12/2017 | --- | $254.96 | --- | --- | 1.87% |
| HP | Helmerich & Payne Inc. | S | 6/23/2016 | --- | $68.26 | --- | --- | 4.03% |
| HRL | Hormel Foods Corp. | E | 8/24/2016 | --- | $37.26 | --- | --- | 1.50% |
| IBM | International Business Machines Corp. | S | 11/10/2015 | --- | $180.67 | --- | --- | 2.88% |
| ITW | Illinois Tool Works Inc. | D | 7/6/2016 | --- | $130.31 | --- | --- | 1.64% |
| JKHY | Jack Henry & Associates Inc. | S | 1/30/2017 | --- | $92.53 | --- | --- | 1.18% |
| JNJ | Johnson & Johnson | E | 1/16/2017 | --- | $118.86 | --- | --- | 2.61% |
| KMB | Kimberly Clark Corp. | S | 6/24/2016 | --- | $131.93 | --- | --- | 2.70% |
| KO | The Coca-Cola Co. | S | 7/28/2016 | --- | $41.23 | --- | --- | 3.25% |
| LEG | Leggett & Platt Inc. | E | 8/25/2016 | --- | $48.62 | --- | --- | 2.67% |
| LLTC | Linear Technology Corp. | E | 7/12/2016 | --- | $64.92 | --- | --- | 1.88% |
| LOW | Lowe's Companies Inc. | S | 1/8/2016 | --- | $76.74 | --- | --- | 1.39% |
| MCD | McDonald's Corp. | S | 11/20/2016 | --- | $127.80 | --- | --- | 2.79% |
| MDT | Medtronic plc. Ordinary Shares | D | 7/12/2016 | --- | $78.88 | --- | --- | 1.93% |
| MKC | McCormick & Company Inc. | S | 1/3/2017 | --- | $97.59 | --- | --- | 1.73% |
| MMM | 3M Co. | E | 12/13/2016 | --- | $182.95 | --- | --- | 2.38% |
| NEE | NextEra Energy Inc. | S | 12/21/2016 | --- | $126.86 | --- | --- | 2.66% |
| NNN | National Retail Properties Inc. | S | 12/4/2016 | --- | $44.72 | --- | --- | 3.94% |
| PBCT | People's United Financial Inc. | D | 6/20/2016 | --- | $19.19 | --- | --- | 3.49% |
| PEP | PepsiCo Inc. | S | 7/13/2016 | --- | $108.15 | --- | --- | 2.64% |
| PG | Procter & Gamble Co. | S | 7/8/2016 | --- | $91.09 | --- | --- | 2.91% |
| PH | Parker-Hannifin Corp. | D | 7/15/2016 | --- | $153.89 | --- | --- | 1.64% |
| PPG | PPG Industries Inc. | S | 1/16/2017 | --- | $102.37 | --- | --- | 1.48% |
| PX | Praxair, Inc. | E | 6/13/2016 | --- | $117.42 | --- | --- | 2.47% |
| ROST | Ross Stores Inc. | E | 6/21/2016 | --- | $68.55 | --- | --- | 0.69% |
| SHW | Sherwin-Williams Co. | S | 7/12/2016 | --- | $311.35 | --- | --- | 0.92% |
| SKT | Tanger Factory Outlet Centers Inc. | S | 1/16/2017 | --- | $33.69 | --- | --- | 3.62% |
| SON | Sonoco Products Co. | E | 2/6/2017 | --- | $52.86 | --- | --- | 2.72% |
| SPGI | S&P Global Inc. | S | 2/8/2017 | --- | $130.39 | --- | --- | 1.08% |
| SWK | Stanley Black & Decker Inc. | S | 1/28/2016 | --- | $126.65 | --- | --- | 1.71% |
| SYY | SYSCO Corp. | S | 1/25/2017 | --- | $52.35 | --- | --- | 2.37% |
| TGT | Target Corp. | S | 8/22/2016 | --- | $65.79 | --- | --- | 3.40% |
| TROW | T. Rowe Price Group Inc. | D | 8/25/2016 | --- | $71.10 | --- | --- | 2.98% |
| TSE:CNR | Canadian National Railway Co. | S | 1/30/2017 | --- | $93.85 | --- | --- | 1.60% |
| UTX | United Technologies Corp. | D | 5/18/2016 | --- | $112.15 | --- | --- | 2.28% |
| VFC | VF Corp. | E | 8/1/2016 | --- | $52.68 | --- | --- | 2.71% |
| WBA | Walgreens Boots Alliance Inc. | S | 7/6/2016 | --- | $85.86 | --- | --- | 1.65% |
| WMT | Wal-Mart Stores Inc. | S | 5/20/2016 | --- | $69.37 | --- | --- | 2.83% |
Disclosure: The author held a long position in Dover Corp. and People's United Financial Inc., but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here. This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions. Please also read our full disclaimer. This article first appeared on ModernGraham.
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