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Dividend Kings Analysis: Water Utilities Can Reduce Portfolio Volatility

In this article I analyze the 28 Dividend Kings, an exclusive group of stocks that have increased their dividend for 50+ consecutive years. There is now one less Dividend King since San Jose Water (SJW) completed its merger with Connecticut Water Service (CTWS) on October 9th. The combined company is now the third largest water utility in the U.S. The top five stocks in the ranking model have remained the same. I continue to feel that 3M Company (MMM) is the top choice based on the current yield. Even though a recently rising stock price has brought the yield down to ~3.5% this is still higher than the trailing 5-year and 10-year averages. When a company of 3M’s quality has a yield between 3.5% and 4.0% it is probably a good time to buy. I already added to my position when the yield was near 4.0% last month and now, I consider my position full. The other point that I want to highlight this month is that Dividend Kings that are water utilities on the list have negative or low betas, meaning they can reduce portfolio volatility. Unfortunately, the Dividend Kings water utilities are generally overvalued at the moment and one needs to wait for a better entry point.


In these analyses, I use nine criteria that permit rapid quantitative screening based on the dividend, earnings growth, dividend growth, dividend safety, and valuation. The nine criteria used in quantitative screening are:

  • History of increasing dividends
  • Dividend yield
  • 5 Years EPS growth rate
  • 5 years dividend growth rate
  • 10 years dividend growth rate
  • Payout ratio
  • Long-term debt-to-equity ratio (D/E)
  • 5-year Beta
  • P/E Ratio for trailing twelve months

The goal here is to identify stocks for further research not to make buy or sell decisions. There are often qualitative factors for each stock that must be researched before making an investment decision. For instance, I also evaluate P/E ratio relative to past 5 years or 10 years and dividend-to-free cash flow ratio. Other qualitative factors can also include management history, recent M&A activity, and effect of tariffs and trade wars on revenue.

Please read the complete article on my profile at Seeking Alpha. To read about the Dividend Kings that are water utilities.

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