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Dividend Kings

Dividend Kings Analysis: Most Are Overvalued

In this article I analyze the 29 Dividend Kings, an exclusive group of stocks that have increased their dividend for 50+ consecutive years. The top five stocks in the ranking model have changed due to increase in valuation for some stocks resulting from the bull market since the Fall of 2019. In addition, the earnings growth rate and dividend growth rates of some Dividend Kings have slowed recently. Since a calendar year has passed, their trailing averages have dropped. But still most of the Dividend Kings are overvalued.

The top five stocks in the ranking model in order are Hormel Foods Corp. (HRL) [DP Score = 9.21], Commerce Bancshares (CBSH) [DP Score = 9.12], Parker-Hannifin Corp. (PH) [DP Score = 9.08], Target Corp. (TGT) [DP Score = 9.07], and Stepan Company (SCL) [DP Score = 9.00]. Notably, 3M Company (MMM) [DP Score = 8.95] has dropped out of the top five resulting from a rising share price, lower 5-year earnings per share growth rate, and lower dividend growth rates. The mean PE [TTM] ratio of the Dividend Kings is now ~29.9 and the median is ~26.8. These are the highest since I started writing on the Dividend Kings. Personally, I view 30X earnings as a cut-off for overvaluation for almost all stocks.

Dividend Kings Overvalued

In any case, the bottom line is that the Dividend Kings are overvalued in my opinion and one should wait before putting new money to work.


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-year EPS growth rate
  • 5-year dividend growth rate
  • 10-year 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 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 at my profile on Seeking Alpha.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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