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Benjamin Clark
Benjamin Clark
Articles (294)  | Author's Website |

Best Dividend-Paying Stocks for Dividend Growth Investors

These companies have grown their dividends annually for at least the last 20 years

Dividend growth investing is a very popular approach that can fit within the ModernGraham methods. When searching for companies that have grown their dividends annually for at least the last 20 years, only 70 out of over 800 companies covered met this requirement. 

Defensive Investors are defined as investors who need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to select companies that present a moderate (though still low) amount of risk.

The elite

The following companies have been rated as undervalued and suitable for either the Defensive Investor or the Enterprising Investor:

Aflac Inc. (NYSE:AFL)

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 following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.03 in 2014 to an estimated $4.11 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.21% 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 $53.04. The company pays a dividend of 87 cents per share, for a yield of 1.9%. Its PEmg (price over earnings per share - ModernGraham) was 10.93, below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Aflac fares extremely well in the ModernGraham grading system, scoring an A+.

A. O. Smith Corp. (NYSE:AOS)

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 price-book 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 undervalued after growing its EPSmg from $1.05 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 7.55% 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 A. O. Smith revealed the company was trading above its Graham number of $23.34. The company pays a dividend of 56 cents per share, for a yield of 1.2%. Its PEmg was 23.59, below the industry average of 23.62, 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 $1.92.

A. O. Smith performs fairly well in the ModernGraham grading system, scoring a B+. 

Cincinnati Financial Corp. (NASDAQ:CINF)

Cincinnati 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 undervalued after growing its EPSmg from $2.69 in 2014 to an estimated $4.82 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.78% 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 Cincinnati Financial revealed the company was trading above its Graham number of $76.19. The company pays a dividend of $2 per share, for a yield of 2.6%, putting it among the best dividend-paying stocks today. Its PEmg was 16.06, below the industry average of 32.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Cincinnati Financial fares extremely well in the ModernGraham grading system, scoring an A.

Carlisle Companies Inc. (NYSE:CSL)

Carlisle Companies qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high price-book 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 $3.51 in 2014 to an estimated $6.51 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 5.54% 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 Carlisle Companies revealed the company was trading above its Graham number of $95.82. The company pays a dividend of $1.44 per share, for a yield of 1.1%. Its PEmg was 19.59, which was above the industry average of 18.51. Finally, the company was trading above its NCAV of $-9.61.

Carlisle Companies performs fairly well in the ModernGraham grading system, scoring a B+.

Leggett & Platt Inc. (NYSE:LEG)

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 and high price-book ratio. 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 $1.14 in 2014 to an estimated $2.35 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 5.06% 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.

At the time of valuation, further research into Leggett & Platt revealed the company was trading above its Graham number of $23.11. The company pays a dividend of $1.42 per share, for a yield of 3.3%, putting it among the best dividend-paying stocks today. Its PEmg was 18.62, above the industry average of 17.71. Finally, the company was trading above its NCAV of $-5.

Leggett & Platt performs fairly well in the ModernGraham grading system, scoring a B+.

Lowe's Companies Inc. (NYSE:LOW)

Lowe's does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and high PEmg and price-book ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for valuation, the company appears to be undervalued after growing its EPSmg from $2.1 in 2015 to an estimated $4.11 for 2019. This level of demonstrated earnings growth outpaces the market's implied estimate of 7.7% 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 Lowe's Companies revealed the company was trading above its Graham number of $29. The company pays a dividend of $1.58 per share, for a yield of 1.6%. Its PEmg was 23.9, below the industry average of 25.61, 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 $-19.93.

Lowe's receives an average overall rating in the ModernGraham grading system, scoring a C+.

People's United Financial Inc. (PBCT)

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 undervalued after growing its EPSmg from 71 cents in 2014 to an estimated $1.04 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.89% 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 People's United revealed the company was trading below its Graham number of $21.65. The company pays a dividend of 69 cents per share, for a yield of 4.6%, putting it among the best dividend-paying stocks today. Its PEmg was 14.28, below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

People's United Financial fares extremely well in the ModernGraham grading system, scoring an A+.

SEI Investments Co. (SEIC)

SEI Investments is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and price-book 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 $1.52 in 2014 to an estimated $2.47 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 7.97% 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 SEI Investments revealed the company was trading above its Graham number of $25.4. The company pays a dividend of 58 cents per share, for a yield of 1%. Its PEmg was 24.43, which was above the industry average of 21.47. Finally, the company was trading above its NCAV of $5.12.

SEI Investments performs fairly well in the ModernGraham grading system, scoring a B-.

Tanger Factory Outlet Centers Inc. (SKT)

Tanger Factory Outlet qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high price-book ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors should feel comfortable proceeding with the analysis.

As for valuation, the company appears to be indervalued after growing its EPSmg from 76 cents in 2014 to an estimated $1.25 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 5.18% 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 Tanger Factory Outlet revealed the company was trading above its Graham number of $11.47. The company pays a dividend of $1.35 per share, for a yield of 5.7%, putting it among the best dividend-paying stocks today. Its PEmg was 18.86, below the industry average of 49.54, 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 $-17.97.

Tanger Factory Outlet Centers fares extremely well in the ModernGraham grading system, scoring an A.

Stanley Black & Decker Inc. (SWK)

Stanley Black & Decker 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 $4.09 in 2014 to an estimated $7.32 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 4.97% 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 Stanley Black & Decker revealed the company was trading above its Graham number of $95.94. The company pays a dividend of $2.42 per share, for a yield of 1.8% Its PEmg was 18.45, below the industry average of 28.31, 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 $-40.05.

Stanley Black & Decker fares extremely well in the ModernGraham grading system, scoring an A-.

T. Rowe Price Group Inc. (TROW)

T. Rowe Price Group is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and price-book 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 $3.79 in 2014 to an estimated $5.76 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 6.15% annual earnings growth over the next seven to 10 years. As a result, the valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into T. Rowe Price Group revealed the company was trading above its Graham number of $60.69. The company pays a dividend of $2.28 per share, for a yield of 1.9%. Its PEmg was 20.79, below the industry average of 22.96, 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 $3.21.

T. Rowe Price Group performs fairly well in the ModernGraham grading system, scoring a B.

The good

The following companies have been rated as fairly valued and suitable for either the Defensive Investor or the Enterprising Investor:

Air Products & Chemicals Inc. (NYSE:APD)

Air Products & Chemicals qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high price-book ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. 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 $5.23 in 2015 to an estimated $8 for 2019. This level of demonstrated earnings growth supports the market's implied estimate of 5.63% 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 Air Products & Chemicals revealed the company was trading above its Graham number of $94.7. The company pays a dividend of $4.25 per share, for a yield of 2.7%, putting it among the best dividend-paying stocks today. Its PEmg was 19.76, below the industry average of 20.47, 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 $-13.21.

Air Products & Chemicals fares extremely well in the ModernGraham grading system, scoring an A-.

Cullen/Frost Bankers Inc. (NYSE:CFR)

Cullen/Frost Bankers is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 $3.92 in 2014 to an estimated $5.42 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 6.25% 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 Cullen/Frost Bankers revealed the company was trading above its Graham number of $84.91. The company pays a dividend of $2.25 per share, for a yield of 2%. Its PEmg was 21.01, which was above the industry average of 20.05.

Cullen/Frost Bankers performs fairly well in the ModernGraham grading system, scoring a B-.

Cintas Corp. (NASDAQ:CTAS)

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 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 $2.94 in 2015 to an estimated $6.44 for 2019. This level of demonstrated earnings growth supports the market's implied estimate of 10.34% annual earnings growth over the next seven to 10 years. As a result, the valuation mode returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cintas revealed the company was trading above its Graham number of $68.91. The company pays a dividend of $1.62 per share, for a yield of 0.9%. Its PEmg was 29.17, below the industry average of 29.23, 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 $-19.68.

Cintas performs fairly well in the ModernGraham grading system, scoring a B.

Expeditors International of Washington (NASDAQ:EXPD)

Expeditors International of Washington 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 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 $1.75 in 2014 to an estimated $2.73 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 8.27% 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 Expeditors International of Washington revealed the company was trading above its Graham number of $28.87. The company pays a dividend of 84 cents per share, for a yield of 1.2%. Its PEmg was 25.05, which was above the industry average of 17.22. Finally, the company was trading above its NCAV of $7.73.

Expeditors International of Washington performs fairly well in the ModernGraham grading system, scoring a B-.

Hormel Foods Corp. (NYSE:HRL)

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 price-book 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 98 cents in 2014 to an estimated $1.6 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 7.21% 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 revealed the company was trading above its Graham number of $19.56. The company pays a dividend of 68 cents per share, for a yield of 1.9%. Its PEmg was 22.92, below the industry average of 24.35, 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 $-1.27.

Hormel performs fairly well in the ModernGraham grading system, scoring a B.

Ross Stores Inc. (ROST)

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 price-book 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 $1.87 in 2015 to an estimated $3.36 for 2019. This level of demonstrated earnings growth supports the market's implied estimate of 8.18% 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 Ross Stores revealed the company was trading above its Graham number of $27.22. The company pays a dividend of 64 cents per share, for a yield of 0.8%. Its PEmg was 24.85, below the industry average of 25.4, 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 $1.55.

Ross Stores performs fairly well in the ModernGraham grading system, scoring a B.

Disclosure: The author held a long position in 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.

About the author:

Benjamin Clark
Benjamin is one of TipRank's top bloggers. He is the founder of ModernGraham.com, a value investing website devoted to the study and modernization of the teachings of Benjamin Graham.

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