As a dividend growth investor, I narrow the universe of stocks I’m willing to consider for investment to only those stocks which have demonstrated a commitment to increasing their dividend every year, year after year. The Dividend Aristocrats is a group of stocks, all in the S&P 500, who have raised their dividend for at least the last 25 years in a row without interruption. To me this is a strong indication of the quality of these companies.
But quality is not the only criteria for purchase. A company must be undervalued, or at worst fairly valued, for me to invest in. I’m not interested in buying a company that is overvalued, no matter how good that company is. In light of this I keep track of the “PAAY” of each of the dividend aristocrats so I can know which stocks are undervalued, and which are overvalued.
Many stocks can trade within a fairly consistent range of yields over time. But if you find a stock that is trading at a higher yield than it usually does, it may be an indication that it is undervalued. There can be two reasons for an above-average yield: the price is down, or the dividend has increased. Or, it could be a combination of the two.
If the price is down, and yet the business prospects are unchanged, then this could be a good buying opportunity. If the dividend has increased, and the stock price has not yet risen to keep up with the increased dividend, this again gives you an opportunity to buy more shares and increase your dividend income at a relatively low price. Therefore, tracking the dividend yield and comparing it to the historical average of that stock can highlight times when it may be undervalued. I call this Percent Above Average Yield. Take the present yield, subtract the historical average yield, and divide the result by the historical average yield (and multiply by 100 to turn it into a percent) to come up with the PAAY. The higher the PAAY, the more undervalued the stock may be. The lower the PAAY, the more overvalued it may be.
When I make my decisions about reinvesting my dividends, I use the one-year PAAY to determine which of my stocks are most undervalued. The stocks in question are ones I already own, and I am therefore looking for opportunities where one or more of my stocks is down for a short period of time but may be expected to rebound. I’m looking to take advantage of short-term opportunities to add more shares. But others may be looking for longer-term trends. They may think that a longer-term yield average is more significant in terms of looking for investment opportunities and would therefore want to use a five-year average. On the other hand, they may be thinking that some stocks may be overvalued and should be sold. In this case, the PAAY would be low.
Therefore, in this article, I present all the Dividend Aristocrats, their prices, dividends, yields, and PAAY rank for both the one-year and five-year periods. Stocks with high PAAYs may be candidates to be bought. Stocks with low PAAYs possibly should be avoided, or if already owned, might be candidates to be sold. Please note, nothing I present here should be considered a recommendation to buy or sell any stock. This is just meant to be a possible starting place for further research. Everybody should do their own due diligence when making transaction decisions. Just because a stock is on this list does not mean it definitely should be bought or sold.
So, without further ado, here is the list of Dividend Aristocrats as of March 28th, with both their one-year and five-year PAAY ranks.
Aristocrats PAAY Lists
(as of March 28, 2020)
Stock | Close | Latest Div. | Yield | 1-yr Average | 1-yr PAAY | 1-yr Rank | 5-yr Average | 5-yr PAAY | 5-yr Rank | Change |
|---|---|---|---|---|---|---|---|---|---|---|
| ABBV | 72.67 | 1.18 | 6.50% | 5.69% | 14.23% | 50 | 4.08% | 59.14% | 13 | 10.28% |
| ABT | 74.56 | 0.32 | 1.72% | 1.55% | 11.11% | 56 | 2.00% | -14.33% | 62 | 14.29% |
| ADM | 33.5 | 0.35 | 4.18% | 3.41% | 22.39% | 42 | 3.00% | 39.40% | 22 | 4.48% |
| ADP | 131.38 | 0.91 | 2.77% | 2.05% | 35.01% | 23 | 2.21% | 25.36% | 31 | 15.19% |
| AFL | 35.4 | 0.28 | 3.16% | 2.16% | 46.43% | 12 | 2.32% | 36.39% | 24 | 3.70% |
| ALB | 55.02 | 0.37 | 2.67% | 2.15% | 24.53% | 37 | 1.61% | 65.67% | 10 | 9.70% |
| AMCR | 7.8 | 0.12 | 5.90% | 4.63% | 27.39% | 31 | 4.53% | 30.13% | 27 | -4.17% |
| AOS | 36.85 | 0.24 | 2.61% | 2.01% | 29.74% | 27 | 1.33% | 96.42% | 3 | 9.09% |
| APD | 193.17 | 1.34 | 2.77% | 2.14% | 29.60% | 28 | 2.50% | 11.08% | 44 | 15.52% |
| ATO | 97.41 | 0.58 | 2.36% | 2.03% | 16.18% | 46 | 2.40% | -1.70% | 57 | 9.52% |
| BDX | 216.58 | 0.79 | 1.46% | 1.24% | 17.32% | 45 | 1.45% | 0.83% | 56 | 2.60% |
| BEN | 17.35 | 0.27 | 6.22% | 3.83% | 62.68% | 4 | 2.46% | 152.76% | 1 | 3.85% |
| BF-B | 54.5 | 0.17 | 1.28% | 1.12% | 13.81% | 51 | 1.30% | -1.94% | 58 | 5.00% |
| CAH | 44.38 | 0.48 | 4.34% | 3.94% | 9.97% | 58 | 2.89% | 50.04% | 16 | 1.01% |
| CAT | 105.44 | 1.03 | 3.91% | 3.03% | 28.80% | 29 | 3.14% | 24.44% | 32 | 19.77% |
| CB | 108.41 | 0.75 | 2.77% | 2.01% | 37.63% | 19 | 2.14% | 29.23% | 28 | 2.74% |
| CINF | 75.95 | 0.56 | 2.95% | 2.16% | 36.60% | 20 | 2.71% | 8.67% | 48 | 5.66% |
| CL | 65.26 | 0.44 | 2.70% | 2.44% | 10.58% | 57 | 2.34% | 15.17% | 38 | 2.33% |
| CLX | 173.19 | 1.06 | 2.45% | 2.69% | -8.94% | 64 | 2.58% | -4.95% | 59 | 10.42% |
| CTAS | 181.57 | 2.55 | 1.40% | 0.90% | 55.32% | 5 | 1.00% | 40.43% | 19 | 24.39% |
| CVX | 68.78 | 1.29 | 7.50% | 4.30% | 74.29% | 2 | 4.14% | 81.24% | 6 | 8.40% |
| DOV | 81.95 | 0.49 | 2.39% | 1.92% | 24.63% | 36 | 2.23% | 7.20% | 51 | 2.08% |
| ECL | 157.48 | 0.47 | 1.19% | 0.97% | 23.01% | 40 | 1.12% | 6.17% | 53 | 2.17% |
| ED | 77.9 | 0.77 | 3.93% | 3.39% | 15.96% | 48 | 3.61% | 8.70% | 47 | 3.38% |
| EMR | 45.58 | 0.5 | 4.39% | 2.98% | 47.20% | 11 | 3.21% | 36.69% | 23 | 2.04% |
| ESS | 228.6 | 2.08 | 3.63% | 2.61% | 38.93% | 18 | 2.98% | 21.77% | 35 | 6.41% |
| EXPD | 65.11 | 0.5 | 1.54% | 1.37% | 11.83% | 52 | 1.43% | 7.32% | 50 | 11.11% |
| FRT | 76.05 | 1.05 | 5.52% | 3.30% | 67.50% | 3 | 2.97% | 86.02% | 4 | 2.94% |
| GD | 130.07 | 1.1 | 3.38% | 2.35% | 44.01% | 14 | 1.98% | 70.89% | 8 | 7.84% |
| GPC | 64.46 | 0.79 | 4.90% | 3.19% | 53.75% | 6 | 2.92% | 67.63% | 9 | 3.54% |
| GWW | 247.15 | 1.44 | 2.33% | 1.97% | 18.32% | 43 | 2.10% | 11.06% | 45 | 5.88% |
| HRL | 44.96 | 0.23 | 2.07% | 2.04% | 1.26% | 63 | 1.85% | 11.83% | 42 | 10.71% |
| ITW | 143.3 | 1.07 | 2.99% | 2.61% | 14.53% | 49 | 2.28% | 31.26% | 26 | 7.00% |
| JNJ | 123.16 | 0.95 | 3.09% | 2.76% | 11.70% | 53 | 2.72% | 13.30% | 40 | 5.56% |
| KMB | 124.89 | 1.07 | 3.43% | 3.07% | 11.69% | 54 | 3.18% | 7.64% | 49 | 3.88% |
| KO | 42.81 | 0.4 | 3.74% | 3.04% | 22.85% | 41 | 3.24% | 15.41% | 37 | 2.56% |
| LEG | 27.95 | 0.4 | 5.72% | 3.83% | 49.61% | 9 | 3.19% | 79.56% | 7 | 5.26% |
| LIN | 167.34 | 0.96 | 2.30% | 1.81% | 27.32% | 32 | 2.28% | 1.06% | 55 | 10.06% |
| LOW | 86.98 | 0.55 | 2.53% | 1.94% | 30.63% | 25 | 1.78% | 41.91% | 18 | 14.58% |
| MCD | 164.01 | 1.25 | 3.05% | 2.40% | 26.84% | 34 | 2.71% | 12.41% | 41 | 7.76% |
| MDT | 89.89 | 0.54 | 2.40% | 2.07% | 15.96% | 47 | 2.09% | 15.01% | 39 | 8.00% |
| MKC | 132.29 | 0.62 | 1.87% | 1.48% | 26.68% | 35 | 1.77% | 5.85% | 54 | 8.77% |
| MMM | 133.24 | 1.47 | 4.41% | 3.47% | 27.12% | 33 | 2.73% | 61.66% | 12 | 2.08% |
| NUE | 33.36 | 0.4 | 4.80% | 3.16% | 51.73% | 7 | 2.90% | 65.25% | 11 | 5.26% |
| O | 56.9 | 0.23 | 4.81% | 3.76% | 27.98% | 30 | 4.52% | 6.28% | 52 | 0.44% |
| PBCT | 11.58 | 0.18 | 6.15% | 4.51% | 36.26% | 21 | 4.15% | 48.26% | 17 | 1.71% |
| PEP | 120.46 | 0.96 | 3.17% | 2.85% | 11.22% | 55 | 2.92% | 8.75% | 46 | 2.91% |
| PG | 110.17 | 0.75 | 2.72% | 2.56% | 6.36% | 59 | 3.12% | -12.63% | 60 | 4.17% |
| PNR | 29.93 | 0.19 | 2.54% | 1.88% | 35.13% | 22 | 2.07% | 22.60% | 34 | 5.56% |
| PPG | 85 | 0.51 | 2.40% | 1.72% | 39.33% | 16 | 1.60% | 50.32% | 15 | 6.25% |
| ROP | 305.79 | 0.51 | 0.67% | 0.54% | 23.12% | 39 | 0.60% | 11.65% | 43 | 10.69% |
| ROST | 82.55 | 0.29 | 1.38% | 0.98% | 41.48% | 15 | 0.98% | 40.43% | 20 | 11.76% |
| SHW | 459.66 | 1.34 | 1.17% | 0.89% | 30.53% | 26 | 0.98% | 19.51% | 36 | 18.58% |
| SPGI | 239.75 | 0.57 | 0.95% | 0.91% | 4.68% | 62 | 1.13% | -15.61% | 63 | 14.00% |
| SWK | 96.66 | 0.69 | 2.86% | 1.90% | 50.41% | 8 | 1.89% | 51.11% | 14 | 4.55% |
| SYY | 50.45 | 0.39 | 3.09% | 2.14% | 44.32% | 13 | 2.45% | 26.23% | 30 | 8.33% |
| T | 29.84 | 0.51 | 6.84% | 5.78% | 18.24% | 44 | 5.55% | 23.25% | 33 | 2.00% |
| TGT | 94.74 | 0.66 | 2.79% | 2.63% | 5.93% | 60 | 3.24% | -14.12% | 61 | 3.13% |
| TROW | 98.43 | 0.9 | 3.66% | 2.73% | 33.96% | 24 | 2.77% | 31.99% | 25 | 18.42% |
| UTX | 97.15 | 0.74 | 3.03% | 2.17% | 39.21% | 17 | 2.35% | 28.77% | 29 | 5.00% |
| VFC | 57.79 | 0.48 | 3.32% | 2.25% | 47.63% | 10 | 2.38% | 39.67% | 21 | 11.63% |
| WBA | 44 | 0.46 | 4.16% | 3.38% | 23.13% | 38 | 2.28% | 82.41% | 5 | 3.98% |
| WMT | 109.58 | 0.54 | 1.97% | 1.88% | 4.91% | 61 | 2.46% | -20.01% | 64 | 1.89% |
| XOM | 36.95 | 0.87 | 9.42% | 5.26% | 79.08% | 1 | 4.05% | 132.57% | 2 | 6.10% |
Conclusion
I believe that a stock’s present yield, when compared to its historical yield (either one-year or five-year), can be an indicator of either undervaluation or overvaluation, and is a good starting point for further research into possible purchases or sales. But I stress again that this is only a starting point. More research into any of these stocks is necessary to make any final decisions. The yield for any particular stock may be up because the business prospects for that company are in decline, and the inevitable dividend cut has just not been announced yet.
On the other hand, the yield may be up simply because the price is down due to global market forces unrelated to the business prospects of that particular company. Or the company may have just recently raised its dividend, and the stock price has not caught up yet to the increased payout. It is up to the individual investor to try to determine which of these is the case. But by using PAAY, you may find some opportunities that you otherwise would have been unaware of. And since these are all Dividend Aristocrats, they have all shown a strong dividend culture and dividend payment history, which makes them worthy of further investigation.
Thank you for reading my article. I welcome your comments and criticisms.
