Growing Global Dividend Aristocrats

Investors love dividends.  Especially when they are growing, sustainable and consistent.  I screened over 70,000 stocks to find which ones had the following characteristics:

• Paid a dividend every year for the last 10 years.
• The dividend grew in each of the last 5 years.
• The dividend payout ratio was less than 100%.  This means that the company is paying a dividend which is less than its earnings per share.  If it pays more than it’s not sustainable.
• Basic earnings per share growth was zero or greater over the last 2 years.
• The stock has a trading volume of at least $1 million per day.

In Screen 1 below you will find the 75 companies that were left along with their current dividend yield and P/E ratio.  As you see there are 63 companies from the United States, 7 from Canada, 4 from India and 1 British.  The trap that many dividend investors fall into is that they don’t check the extremely important cash flow statement.  EPS may be greater than the dividend but that doesn’t mean they have the cash to pay it!  This is because companies may use up their earnings for working capital or other items.  Hence, it’s a good idea to check the free cash flow versus the dividend amount paid.  Free cash flow (FCF) is cash flow from operations minus capital expenditures.  It’s the money left to pay for dividends, do acquisitions, pay down debt or buyback shares.  If we remove the companies with FCF less than dividends paid then we are left with 60 companies.  These are shown in Screen 2.  With the 10-year US treasury yielding 3%, let’s assume you want to learn a minimum of 3% dividend yield.  That leaves us with 12 companies from our initial total of 70,000+.  These are shown in Screen 3.  Have fun hunting!

Screen 1

The companies have been sorted by dividend yield (highest to lowest).

Screen 2

Removed companies with FCF < Dividend and sorted by dividend yield.

Screen 3

Removed companies with FCF < Dividend, and those with a dividend yield of less than 3%.