Dividend Kings represent the cream of the crop when it comes to dividend-paying stocks. These elite companies have increased their dividends for at least 50 consecutive years, demonstrating exceptional financial stability, consistent growth, and a strong commitment to shareholder returns. This remarkable achievement requires companies to maintain profitable operations through multiple economic cycles, recessions, and market downturns while continuously growing their payouts to shareholders.
The Power of Combining Dividend Kings with Guru Models
While a long dividend growth streak is impressive, investors should look beyond just dividend history. Validea’s guru-based models, which are based on the strategies of legendary investors like Warren Buffett, Peter Lynch, and Benjamin Graham, can help identify Dividend Kings that also possess strong fundamental characteristics. This combination of dividend excellence and fundamental strength can provide investors with both reliable income and potential capital appreciation.
Let’s examine five Dividend Kings that also score highly on Validea’s investment models:
1. Archer-Daniels-Midland (ADM) ADM excels in two key guru models:
Peter Lynch Model (93% score):
- PEG ratio of 0.48 shows growth at a reasonable price
- Inventory to sales has decreased from 14.54% to 12.73% year-over-year, indicating efficient operations
- Strong EPS of $4.99 with moderate debt/equity ratio of 47.68%
Value Composite Model (92% score):
- Ranks in the 4th percentile for value metrics among all stocks
- Strong quality score in the 87th percentile
- Demonstrates excellent combination of value and quality metrics
2. W.W. Grainger (GWW) Grainger shines with:
Twin Momentum Model (94% score):
- Fundamental momentum of 7.65% places it in top 11th percentile
- Twelve-month price momentum of 53.63% shows strong market performance
- Combined momentum ranking in top 5th percentile
Warren Buffett Model (93% score):
- Exceptional 41.9% average return on equity over 10 years
- Debt could be paid off in less than two years using earnings
- Management earns 21.6% return on retained earnings
3. Nucor Corporation (NUE) Nucor stands out with:
Peter Lynch Model (93% score):
- Very favorable PEG ratio of 0.33
- EPS growth rate of 41.5% falls within ideal 20-50% range
- Moderate debt/equity ratio of 33.89%
Acquirer’s Multiple Model (89% score):
- Quality score in the 75th percentile
- Attractive EV/EBITDA multiple of 7.2
- Strong operating earnings relative to enterprise value
4. Sysco Corporation (SYY) Sysco impresses with:
O’Shaughnessy Growth/Value Model (100% score):
- Persistent earnings growth over five years from $0.42 to $3.89
- Price/Sales ratio of 0.46, well below the 1.5 threshold
- Strong relative strength of 50
P/B Growth Model (66% score):
- Return on assets of 7.67% exceeds industry average of 2.40%
- Cash flow from operations to assets of 11.34% vs industry average of 5.90%
- Low return on assets variance of 7.72% vs industry average of 11.00%
5. Tennant Company (TNC) Tennant excels in:
Peter Lynch Model (93% score):
- Favorable PEG ratio of 0.45
- Strong EPS growth rate of 34.4%
- Healthy debt/equity ratio of 34.17%
Private Equity Model (90% score):
- EV/EBITDA of 9.40 places it in 22nd percentile for value
- Successfully reducing debt (from $295.1M to $194.2M year-over-year)
- Improving asset turnover from 1.01 to 1.12
The combination of Dividend King status and high scores on Validea’s guru models provides multiple layers of validation for these investments. The dividend growth streak demonstrates historical stability and management’s commitment to shareholders, while the guru model scores indicate current fundamental strength and reasonable valuations.
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