11 Dividend Challengers With Highest Dividend Payout Potential

By Dividend (GuruFocus | Original Link)

Dividend Challengers are stocks with a history of consecutive dividend hikes of more than 5 years but less than 10. Exactly 195 companies raised dividends over such a long history but the potential for additional increases is still high. I made a screen of the best yielding Dividend Challengers with the highest dividend payout potential. First, I selected all stocks with a debt to equity ratio of less than 0.5 and a current payout ratio below 20 percent. Second, the company needs to grow in earnings over the mid-term. Because of this, I decided to screen all stocks with 5-year earnings per share growth of at least 10 percent. Eleven companies remained of which nine are currently recommended to buy.

Here are my favorite stocks:

CVS Caremark (CVS ) has a market capitalization of $56.13 billion. The company employs 202,000 people, generates revenue of $107,100.00 million and has a net income of $3,488.00 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $7,898.00 million. The EBITDA margin is 7.37 percent (operating margin 5.91 percent and net profit margin 3.26 percent).

Financial Analysis: The total debt represents 15.52 percent of the company’s assets and the total debt in relation to the equity amounts to 26.32 percent. Due to the financial situation, a return on equity of 9.22 percent was realized. Twelve trailing months earnings per share reached a value of $2.83. Last fiscal year, the company paid $0.50 in form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 15.58, P/S ratio 0.53 and P/B ratio 1.52. Dividend Yield: 1.45 percent. The beta ratio is 0.74.

Cummins (CMI) has a market capitalization of $19.21 billion. The company employs 44,000 people, generates revenue of $18,048.00 million and has a net income of $1,946.00 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $2,586.00 million. The EBITDA margin is 14.33 percent (operating margin 14.85 percent and net profit margin 10.78 percent).

Financial Analysis: The total debt represents 5.88 percent of the company’s assets and the total debt in relation to the equity amounts to 12.49 percent. Due to the financial situation, a return on equity of 36.37 percent was realized. Twelve trailing months earnings per share reached a value of $10.06. Last fiscal year, the company paid $1.32 in form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 10.03, P/S ratio 1.06 and P/B ratio 3.52. Dividend Yield: 1.99 percent. The beta ratio is 2.01.

Costco Wholesale (COST) has a market capitalization of $41.36 billion. The company employs 92,000 people, generates revenue of $88,915.00 million and has a net income of $1,542.00 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3,294.00 million. The EBITDA margin is 3.70 percent (operating margin 2.74 percent and net profit margin 1.73 percent).

Financial Analysis: The total debt represents 8.05 percent of the company’s assets and the total debt in relation to the equity amounts to 17.94 percent. Due to the financial situation, a return on equity of 12.81 percent was realized. Twelve trailing months earnings per share reached a value of $3.58. Last fiscal year, the company paid $0.89 in form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 26.73, P/S ratio 0.46 and P/B ratio 3.46. Dividend Yield: 1.15 percent. The beta ratio is 0.68.

Take a closer look at the full table of Dividend Challengers with highest payout potential. The average price to earnings ratio (P/E ratio) amounts to 6.40 and forward P/E ratio is 13.73. The dividend yield has a value of 1.15 percent. Price to book ratio is 3.13 and price to sales ratio 1.49. The operating margin amounts to 13.37 percent and the beta ratio is 1.18.