• The First Cut
  • Cash Flow Kings With Rising Dividends

    by John Bajkowski

    Cash Flow Kings With Rising Dividends Splash image

    Investors continue to seek out dividend income from common stocks even as the uncertainty about future dividend tax rates weighs on people’s minds. The 15% maximum rate for qualified dividends is set to expire at the end of this year unless Congress and the president act. However, the environment of low interest rates coupled with the relative stability of high-yield stocks during market downturns keep dividend-paying stocks on investor’s shopping lists.

    The First Cut seeks out domestic, exchange-listed stocks that have consistently raised their annual dividend payment over the last seven years while maintaining positive free cash flow over each of the last seven years. Financial stocks were excluded because their financial statements are not comparable with firms in other industries.

    Cash flow is fundamentally different from earnings. Earnings are determined using principles of accrual accounting, while cash flow measures the direct consumption and generation of cash. The First Cut screens for positive free cash flow, which is calculated by examining cash flow from operations (a measure of a firm’s ability to generate cash from day-to-day operations) and then subtracting capital expenditures and dividend payments. Free cash flow is considered to be excess cash flow that a company can use as it deems most beneficial. Strong free cash flow provides financial flexibility to increase dividends, develop new products or services, enter new markets, pay off debt, or buy shares back.

    The 30 stocks with the highest dividend yield (annual dividend payment divided by price) and with a current dividend yield above their average yield of the last three years made the First Cut. The historical growth rates and the consensus earnings growth rate estimate measure past and expected company performance. The 52-week price change highlights recent stock market performance.

     
     
     
    Company (Ticker)
    Div Yield  
    Ind
    Div
    ($/Sh)
    Free
    Cash
    Flow
    ($/Sh)
    Annual Growth Rate (%) Share
    Price
    (10/15)
    ($)
    52-Wk
    Price
    Change
    (%)
     
     
    Current
    (%)
    3 Yr
    Avg
    (%)
    Historical Est
    EPS
    3-5 Yr
     
     
    Div
    Free Cash
    Flow
     
    EPS
     
    Description
    Courier Corp. (CRRC) 5.3 3.9 0.84 0.77 20.5 59.2 -28.5 na 15.82 8 book manufac'g & publishing
    Lockheed Martin Corp. (LMT) 4.3 2.2 3.00 5.28 23.2 -12.1 10.3 8.5 70.02 -6 advanced tech sys & prods
    Kimberly-Clark Corp. (KMB) 4.0 3.8 2.64 2.40 7.0 36.0 11.6 8.3 66.38 12 personal & healthcare prods
    Watsco, Incorporated (WSO) 3.7 3.6 2.08 1.52 25.8 -8.5 -22.0 15.3 56.80 7 air-cond, heat & refrig equip
    Johnson & Johnson (JNJ) 3.4 3.0 2.16 3.61 9.7 8.8 5.7 6.3 63.57 4 healthcare prods
    Abbott Laboratories (ABT) 3.3 2.8 1.76 3.28 10.7 19.1 48.8 9.7 53.17 2 healthcare prods
    Automatic Data Processing (ADP) 3.2 3.1 1.36 1.55 15.3 19.0 9.5 10.6 42.94 5 business outsource solutions
    National Semiconductor Corp. (NSM) 3.1 1.7 0.40 1.15 31.7 -5.5 -8.1 7.3 13.04 -11 integrated circuits
    Procter & Gamble Company (PG) 3.1 2.7 1.93 4.19 12.0 10.9 7.5 8.8 62.76 10 consumer pkgd goods
    Campbell Soup Company (CPB) 3.0 2.9 1.10 1.10 10.5 139.6 6.6 6.5 36.61 13 convenience food prods
    PepsiCo, Inc. (PEP) 2.9 2.6 1.92 3.42 15.3 7.5 4.1 8.9 66.68 6 food, snacks & beverages
    Analog Devices, Inc. (ADI) 2.8 2.7 0.88 1.80 12.6 -14.4 -15.3 16.0 31.67 12 integrated circuits
    Colgate-Palmolive Company (CL) 2.8 2.2 2.12 3.35 11.2 39.4 21.1 9.1 75.89 -4 consumer pkgd goods
    Medtronic, Inc. (MDT) 2.7 1.7 0.90 2.52 23.1 15.1 5.0 9.2 33.29 -10 medical therapy devices
    General Dynamics Corp. (GD) 2.6 2.1 1.68 4.70 18.2 11.1 13.9 7.8 63.93 -5 aviation & weapon sys
    McGraw-Hill Companies, Inc. (MHP) 2.6 2.5 0.94 2.68 7.2 3.2 -1.0 5.6 35.54 20 information servs provider
    Pool Corp. (POOL) 2.5 2.3 0.52 1.49 8.2 39.3 -39.3 15.0 20.76 -12 swimming pools; leisure prods
    Brady Corp. (BRC) 2.4 2.3 0.72 2.63 7.7 19.4 -8.2 8.0 30.40 7 facility & cable ID; bar-codes
    Weyco Group, Inc. (WEYS) 2.4 1.8 0.64 1.45 20.2 128.1 -15.0 na 26.23 17 men's footwear
    Cardinal Health, Inc. (CAH) 2.3 1.8 0.78 4.51 21.5 35.5 -7.2 9.2 33.22 19 healthcare prods & servs
    L-3 Communications Holdings (LLL) 2.3 1.4 1.60 9.68 23.1 10.7 21.7 8.8 71.05 -6 aircraft maintain contractor
    Strayer Education, Inc. (STRA) 2.3 1.0 3.00 5.78 28.5 35.9 28.2 17.7 131.48 -42 academic programs
    United Technologies Corp. (UTX) 2.3 2.2 1.70 3.95 14.7 5.8 3.6 10.4 74.10 15 high-tech aerospace servs
    Harris Corp. (HRS) 2.2 1.8 1.00 3.76 26.0 27.7 19.7 5.0 44.47 19 communications & info tech
    ITT Corp. (ITT) 2.1 1.4 1.00 3.19 24.5 12.6 9.9 11.7 47.81 -12 defense electronics; fluid tech
    Martin Marietta Materials, Inc (MLM) 2.0 1.5 1.60 1.84 16.6 63.3 -28.7 10.8 79.54 -15 construction aggregates
    Becton, Dickinson and Co. (BDX) 1.9 1.6 1.48 3.47 15.4 23.6 15.7 9.4 76.13 11 medical supplies & devices
    Cintas Corp. (CTAS) 1.8 1.7 0.48 1.59 7.2 24.3 -12.3 10.7 27.36 -7 uniforms & document mgmt
    QUALCOMM, Inc. (QCOM) 1.7 1.4 0.76 1.60 16.3 42.9 -12.9 17.0 44.79 6 wireless telecommun prods
    Moody's Corp. (MCO) 1.6 1.2 0.42 1.82 12.2 -4.3 -13.2 11.1 26.50 11 credit ratings & research
      Field: Operator: Factor: Compare to:
      Exchange Not Equal   Over the counter
    And ADR/ADS Stock Is False    
    And Country Contains   United States
    And Sector Not Equal   Financial
    And Industry Not Equal   Real Estate Operations
    And Free cash flow/share 12m >   0
    And Free cash flow/share Y1 >   0
    And Free cash flow/share Y2 >   0
    And Free cash flow/share Y3 >   0
    And Free cash flow/share Y4 >   0
    And Free cash flow/share Y5 >   0
    And Free cash flow/share Y6 >   0
    And Free cash flow/share Y7 >   0
    And Dividend, indicated >=   Dividend Y1
    And Dividend 12m >=   Dividend Y1
    And Dividend Y1 >   Dividend Y2
    And Dividend Y2 >   Dividend Y3
    And Dividend Y3 >   Dividend Y4
    And Dividend Y4 >   Dividend Y5
    And Dividend Y5 >   Dividend Y6
    And Dividend Y6 >   Dividend Y7
    And Yield >   Yield-Average 3 years
    John Bajkowski is president of AAII.


    Discussion

    Corrie therese from CA posted over 5 years ago:

    this is very good article for individual investors like myself.


    Corrie therese from CA posted over 5 years ago:

    Also this article has no print option.


    John from IL posted over 5 years ago:

    Corrie, there is a print option for the article. It is along the left hand side of the screen after around two paragraphs into the article. The header is listed as "Print this article" and below you should find a link "Printer & mobile friendly version." that brings up version of the page with only the article.


    Jerrold from FL posted over 5 years ago:

    The annual dividend growth rates - Does the company raises dividends annually? For how long? By what percentage? For how many years have they done so?

    Just some really important questions left unanswered.


    John from IL posted over 5 years ago:

    Jerrold,

    The criteria used for the First Cut are listed below the table of passing companies. This first cut required an increase in the annual dividend per share payment for each of the last six years. The screen did not require a minimum growth rate. The table of passing companies lists the three-year annual growth rates. The First Cut is limited to one page of the AAII Journal, so it can be difficult to detail the filters behind the First Cut.


    N from GA posted over 5 years ago:

    Having recently retired I am on the hunt for safe Dividends


    Nash from GA posted over 5 years ago:

    As a recent retire I am converting to dividend stocks. More information like this wuuld be appreciated.


    George Blue from TX posted over 3 years ago:

    I follow the DI portfolio (12 stocks) and would like to present their increasing yield (last 10 years OK) along with FCF and current yield. Can you advise? Thanks.


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