My ratings criteria include factors such as yield, number of years paying and raising dividends, five-year Dividend Growth Rate (DGR), five-year projected Earnings Growth Rate (EGR), total return for the past twelve months, and the P/E and the payout ratio. I feel that this selection covers the past dividend-paying history, the potential future earnings growth, and the valuation of the company.
While my portfolio is complete for now, and I intend to let it run for a while without making any major adjustments, I do continue to study dividend companies and consider them for future inclusion. One place I like to look for ideas is a list of the companies that top investors are purchasing.
I chose to look at the portfolio of First Eagle Investment Management, managed by legendary investor Jean-Marie Eveillard. According to GuruFocus, this portfolio is currently worth approximately $30 billion and has returned an average of 12.90% over the past ten years.
The first company on his list is SYSCO Corporation (NYSE:SYY), in the food services industry. The company is currently trading at approximately $34 and yields 3.20%. It has raised dividends every year for 36 years, its five-year DGR is 6.10%, and it has returned 26.10% over the past twelve months.
Other metrics that I use when calculating a rating for a dividend company include the analysts’ five-year annual growth estimate (7.70%), the company’s P/E (18.90), and its dividend-payout ratio (60%).
As of March 31, 2013, the company was the third largest holding in Mr. Eveillard’s portfolio, comprising 2.80% of his total holdings. He owns 24.3 million shares, worth $826 million at today’s price.
SYSCO Corporation (NYSE:SYY) scores a 17 on my ratings system, which is worth keeping an eye on. At this point, I have not selected any company that scores lower than an 18. However, I had not considered SYSCO Corporation (NYSE:SYY) in the past, so this is a new addition to my “Watch” list.
The next company is Microsoft Corporation (NASDAQ:MSFT). The company is currently trading at approximately $33 and yields 2.70%. It has raised dividends every year for 7 years, its five-year DGR is 15.60%, and it has returned 8.90% over the past twelve months.
Other metrics include analysts’ five-year annual growth estimate (8.50%), the company’s PE (17.10), and its dividend-payout ratio (44%).
As of March 31, 2013, the company is the fourth largest holding in Mr. Eveillard’s portfolio, comprising 2.60% of his total holdings. He owns 27.7 million shares, worth $914 million at today’s price.
Microsoft Corporation (NASDAQ:MSFT) scores a 14 on my ratings system, which is too low. Microsoft Corporation (NASDAQ:MSFT) hasn’t been paying dividends for the requisite 10 years, either. But, if the company continues its dividend-payment for three more years, it may be a very good selection in 2016.
The next company is Intel Corporation (NASDAQ:INTC). It is currently trading at approximately $24 and yields 3.80%. It has raised dividends every year for 9 years, its five-year DGR is 14.50%, and it has returned (12.90)% over the past twelve months.
Other metrics include analysts’ 5-year annual growth estimate (11%), the company’s PE (12.10), and its dividend-payout ratio (42%).
Intel Corporation (NASDAQ:INTC) is the seventh largest holding in Mr. Eveillard’s portfolio, comprising 2.40% of his total holdings. It is the only company on this list that he made adjustments to during the last quarter, as he increased his Intel holdings by 33%. He now owns 33.4 million shares, worth $802 million at today’s price.
Intel Corporation (NASDAQ:INTC) scores a 16 on my ratings system, and is just one year short of hitting the ten-years of raising-dividends mark. I definitely do not like its 12-month return, although perhaps that is what made it attractive to Mr. Eveillard at this point in time.
The next company is 3M Co (NYSE:MMM), which I recently reviewed.
3M Co (NYSE:MMM) is the twelfth largest holding in Mr. Eveillard’s portfolio, comprising 2% of his total holdings, at 5.7 million shares, worth $627 million at today’s price of $110 per share.
3M Co (NYSE:MMM) scores a 15 on my ratings system.
The last company on Mr. Eveillard’s list is Cincinnati Financial Corporation (NASDAQ:CINF). The company is currently trading at approximately $50 and yields 3.30%. It has raised dividends every year for 54 years, its five-year DGR is 2.30%, and it has returned 41% over the past twelve months.
Other metrics include analysts’ five-year annual growth estimate (2.50%), the company’s PE (16.60), and its dividend-payout ratio (54%).
Cincinnati Financial Corporation (NASDAQ:CINF) is the twentieth largest holding in Mr. Eveillard’s portfolio, comprising 1.5% of his total holdings. He owns 9.6 million shares, worth $480 million at today’s price.
Cincinnati Financial Corporation (NASDAQ:CINF) scores a 14 on my ratings system; while its dividend-paying history and share-price appreciation are terrific, its DGR and EGR are both far too low for my taste.
I’ve included a chart so that you can see how each of these five companies score on my ratings system.
| Years | Yield | DGR | EGR | Payout | Total Return | PE | TOTAL | |
|---|---|---|---|---|---|---|---|---|
| SYY | 4 | 2 | 1 | 2 | 2 | 4 | 2 | 17 |
| MSFT | 0 | 1 | 4 | 2 | 3 | 2 | 2 | 14 |
| INTC | 0 | 3 | 4 | 3 | 3 | 0 | 3 | 16 |
| MMM | 4 | 0 | 0 | 2 | 4 | 3 | 2 | 15 |
| CINF | 4 | 2 | 0 | 0 | 2 | 4 | 2 | 14 |
I like Mr. Eveillard’s dividend companies very much, but I think my ten are better.
The article The Top 5 Dividend Companies of Jean-Marie Eveillard originally appeared on Fool.com and is written by Karin Hernandez.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
