For Dividend Security Check Out These 10 Profitable Champions
If you like dividend stocks, you probably want to make sure they can maintain, or even grow, their dividend. If history is any indicator, Dividend champions can likely offer the stability you're looking for. [Related list: 20 Highest Yield Dividend Champions ]
"Dividend Champion" is a term coined by The DRiP Investing Resource Center referring to U.S Companies that have offered AND increased their dividend for a minimum of 25 straight years. Just over 100 make the cut.
Because dividend payments are taken from a company's profits, it's important to make sure the profit margins of "champions" are strong. So t o narrow down the list to the names below we wanted to pick out stocks with impressive profitability metrics. In particular, to analyze their profitability, we compare the companies' trailing twelve month (TTM) gross, operating, and profit margins with their industry averages to find those more profitable than their peers. Here's a breakdown:
TTM Gross margin: This metric that tells us the percentage of a company's revenue is left after paying all production expenses. Costs include overhead, payroll and taxation. ((revenues – cost of goods sold) / Revenue ) *100 = Gross margin %
TTM Operating margin: This tells us the percentage remaining after all operating expenses are paid. Operating expenses include: supplies, repairs, research and development, and depreciation. (Operating Income / Net Operating Revenue) *100 = Operating Margin %
TTM Pretax margin: A company's earnings before taxes. This incorporates all of the expenses associated with business excluding taxes. It can help to determine the overall operating efficiency of the firm. The higher the pretax margin, the more profitable the company. (Net profit before taxes / net sales) *100 = Pretax Margin
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Below is a list of stocks that we compiled using the criteria above.
As a recap: These stocks are dividend champion that have a market cap over $300 million and are trading over $1 per share. They have also reported gross, pretax and operating margins more profitable than their industry peers. These impressive margins help ensure they will continue to consistently pay and increase their dividends.
The list below has the final stocks. Do you think they will maintain their dividend for the years to come?
1. 3M Co. ( MMM): Operates as a diversified technology company worldwide. Market cap at $71.92B, most recent closing price at $102.62.
The company has raised dividends for 54 consecutive years. Current yield: 2.34%. TTM gross margin at 50.75% vs. industry average at 42.96%. TTM operating margin at 21.68% vs. industry average at 13.81%. TTM pretax margin at 21.24% vs. industry average at 12.7%.
2. Commerce Bancshares, Inc. ( CBSH): Operates as the bank holding company for Commerce Bank, N. Market cap at $3.51B, most recent closing price at $38.42.