This week’s scan seeks Dividend Aristocrats with low levels of debt. Dividend Aristocrats are companies that have increased dividends for at least 25 consecutive years. They must also be in the S&P 500 and actively traded to qualify. The entire listing of the 65 Aristocrats we scanned can be found HERE.
Ultimately, we are after low-volatility stocks with less sensitivity to interest rates and a long track record of consistent dividend growth.
In addition to our base criteria, we scanned for companies with reasonable valuations and expectations for future earnings growth.
As always, we encourage our readers to send us scan requests.
This week’s scan resulted in three insurance companies, an asset management company, and a freight and logistics company. Analysts expect all five firms will grow EPS over the next five years, and two of them have no long-term debt on the books. Some of the companies are trading poorly and thus have weak technical backing now. Caution is urged at the moment with some of these stocks.
Company Summaries (all descriptions courtesy Zacks)
Aflac Incorporated (AFL)
The company is a general business holding company and oversees the operations of its subsidiaries by providing management services and making capital available. Its principal business is voluntary supplemental and life insurance, which is marketed and administered through American Family Life Assurance Company of Columbus (Aflac) in the United States (Aflac U.S.) and, effective Apr 1, 2018, through Aflac Life Insurance Japan Ltd. in Japan (Aflac Japan).
Aflac trades with a low P/E, as is typical for the insurance industry. Revenue growth has flattened out over the past five years, but earnings continue to grow as their profit margin has steadily increased over the past ten years. As shown below, AFL has a relatively high technical rating from SimpleVisor. Its stock price graph shows a steady rise except for the hiccups of 2008 and 2020.
Chubb Limited (CB)
Chubb Limited was formerly known as ACE Limited. ACE Limited after acquiring The Chubb Corp in Jan 2016 assumed the name of Chubb. Headquartered in Zurich, Switzerland, the company boasts being one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and largest publicly traded P&C insurer, based on market capitalization of $56.9 billion.
Like AFL, CB has a decent technical score, albeit a hold rating. Chubb had slightly negative earnings growth over the last five years but expectations for solid growth over the next five years. Such a forecast provides us some confidence the dividend will continue to increase. Chubb has slightly more earnings risk than Aflac as it insures property and casualty versus life insurance for Aflac.
Cincinnati Financial Corp (CINF)
Cincinnati Financial Corporation, formed in 1968 with its headquarters in Fairfield, OH, markets property and casualty insurance. CINF owns three subsidiaries: The Cincinnati Insurance Company, CSU Producer Resources Inc. and CFC Investment Company. In addition, the parent company has an investment portfolio.
CINF is another property and casualty insurance company. It is on a technical sell rating. CINF has a significantly lower level of debt than many of its competitors. Such a conservative stance reduces leverage and limits profits, but it has allowed for 61 straight years of increasing its dividend.
Expeditors Intl. of Washington Inc. (EXPD)
Expeditors International of Washington Inc. is a leading third-party logistics (3PL) provider. The company, based in Seattle, WA, is engaged in the business of global logistics management, including international freight forwarding and consolidation, for both air and ocean freight.
The trucking shortage and supply line problems have benefited EXPD’s top and bottom lines. Revenue this past year is running at almost twice the rate of the pre-pandemic years. At its peak a few weeks ago, the stock reflected strong growth as it was up two times its pre-pandemic level. It is on a strong sell rating as it has given up some of those gains. We suspect revenues and earnings will normalize, keeping the stock price subdued. Its conservative stance likely allows it to continue its streak of 27 years with a dividend increase.
T. Rowe Price Group Inc. (TROW)
Founded in 1937 and headquartered in Baltimore, T. Rowe Price Group, Inc. is a global investment management organization that provides a broad array of mutual funds, sub-advisory services, and separate account management for individual and institutional investors, retirement plans and financial intermediaries.
Over the last few weeks, TROW’s stock price has been hit relatively hard as the yield curve flattens and trading activity weakens. It has a strong sell rating reflecting its recent performance.
Five for Friday
Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry and/or economic trends. Investment themes may not always represent our current forecast.
This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.