Feb. CCC List w/ 10-Year YOC ranking

Last month I decided to take the CCC spreadsheet and rank the stocks based on their 10-year YOC.  If you are unfamiliar with what Yield-On-Cost is (YOC) then refer to my resources tab or see below for an example.  If you don't know about David Fish's Champion, Challenger and Contender (CCC) spreadsheet then you are doing yourself a disservice, it can be found here.

Let's say you purchased a stock at $10/share in 2013 that paid a 4% dividend or $0.40/share. In order to achieve a 10-year YOC of 10% that stock would need to pay out at least $1.00/share by 2023.

You may wonder why I care about a 10-year YOC instead of just the 1,3,5 and 10-year CAGR's.  The main factor that the CAGR leaves out is the starting dividend yield.  The starting dividend in combination with the dividend growth rate will greatly influence your returns.

I'm doing this screen once again and applying it to the Feb. CCC sheet and will compare the results.  The original article used the Jan. CCC sheets and can be found here.

The purpose of this screening process will be to identify unfamiliar companies that have a high expected dividend growth rate combined with a starting yield that would produce greater returns.  These companies may be good candidates for further research.

The first step was to sort all stocks by their current dividend yield and eliminate any stocks not paying at least a 2% yield.  

Next I sorted all columns by TTM P/E and eliminated every stock with a TTM P/E over 18.  

Then I decided to take the latest CCC sheet and add some new columns to calculate a 10-year YOC using each stock's 1,3, 5 and 10-year compound annual growth rate (CAGR). I will call these new metrics 10YOC1, 10YOC3, 10YOC5, and 10YOC10 for simplicity.

I looked for any companies that had a 10YOC1, 10YOC3, 10YOC5 or 10YOC10 of 10% or higher. I applied this to the list of Champions, Contenders and Challengers. After applying this rule the lists dropped to 8, 41, and 38 companies respectively.

Next, I wanted to look to see if the DGR was increasing or decreasing. I highlighted in red the 10-year YOC's of companies that were both reducing their rate of increases and still under 10%.

This is a previous example of how it looked:

Companies got credit for increasing their dividends at faster rates. For example: The 10YOC5 for AWR in the example above was 4.97 and did not get highlighted in red because its 10YOC5 was higher than its 10YOC10 of 4.09.

Next, I decided to remove any company that had a 10YOC1 in the red for Champions and a 10YOC1 or 10YOC3 in red for Contenders and Challengers.

For the Example Champions list above this removed LEG, MDT, NUE and WMT.

This elimination dropped the list sizes for the Champions, Contenders and Challengers to 8, 21 and 29 respectively.  This compares to last months list sizes of 8, 16 and 23.  

Here are the 58 candidates left that may be worthy to do further research on.

Champions

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Contenders

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Challengers

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At a quick glance it seems that a lot of the companies are the same as last month which is expected.  However there have been some additions and removals.  This is mainly due to a price correction which increases a stock's starting yield.      
The additions to the Champions list were AFL and BDX.  The companies removed were WAG and VFC.

Some companies like Safeway (SWY) and Reynold's American (RAI) ran up in price and are now off the list while companies like John Deere (DE) and Raytheon (RTN) have now made the cut.

Keep in mind that this is just a starting point and I feel these companies need further research before making an investment.