Thursday , 24 June 2021

These 4 Dividend Paying Stocks All Have Great Track Records Of Rewarding Their Owners

…In today’s “exciting” stock market full, dividend strategy is often considered boring. However, dividends are the important part of total returns for long-term investors. The dividend players mentioned below all have great track records of rewarding their owners.

This version of the original article by Steven Chen has been edited for length (…) and clarity ([ ]) by to provide a fast & easy read

My Strategy

My strategy of picking dividend players is part of my factor-based stock quality ranking. See below for details of criteria.

  1. Consecutive dividend payments for at least 10 years;
  2. Annual dividend payment at least doubled for the past decade;
  3. Free cash flow at least doubled for the past decade;
  4. Net income at least doubled for the past decade;
  5. The free cash flow dividend coverage is greater than 2x;
  6. The payout ratio is less than 66%;
  7. Recent 3-year dividend CAGR at more than 10%;
  8. Cashflow return on capital invested above 20%;
  9. Debt/equity is less than 1x;
  10. The current ratio is greater than 1.2x.
  • The criteria 1 is the most important here, demonstrating management’s willingness to reward its owners through dividend growth.
  • Criteria 2, 3, 4 and 7 imply the track record of business growth in line with the dividend hikes.
  • Criteria 5, 6 and 8 indicate the business strength relative to current dividend payout level.
  • Criteria 9 and 10 demonstrate the financial strength to support further dividend increases.

Now check out my picks of some dividend-paying stocks below. Each of them also earns a high overall score based on my stock quality ranking.

1. FactSet Research Systems (FDS)

With annual sales of over $1.3 billion from over 5,000 clients in 24 countries, FactSet provides financial information and analytic software for analysts, portfolio managers, and investment bankers at global financial institutions. The company’s shareholders benefit from its consistently high returns on capital and almost tripled free cash flow for the past 10 years.

Source: FDS 2018 Investor Day Presentation

FDS has been increasing its dividends every year for almost two decades, with an even more fantastic track record of consecutive revenue growth for 38 years. The stock currently has a payout ratio of under 40%, a current ratio of over 2x, and free cash flow/net income of over 1x, implying its potential for further dividend hikes in the long run.

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2. Atrion Corporation (ATRI)

Atrion is a leading supplier of medical devices and components to niche markets in the global healthcare and medical industry. While it is a comparatively small company in the sector, Atrion is the leading U.S. manufacturer of products in several market niches, including soft contact lens disinfection cases, clamps for IV sets, vacuum relief valves, surgical loops used in minimally invasive surgery, and check valves.

(Click on image to enlarge)

Source: Atrion Corporation Annual Report 2017

The stock (as shown above) has consistently outperformed the market benchmark and the sector benchmark. It has its track record of raising dividends consecutively for 15 years now, with a super clean balance (i.e., no debt, plenty of cash, and a current ratio of over 9x).

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3. Ross Stores (ROST)

Ross is the largest off-price apparel and home fashion chain in the U.S. with over 1,600 stores through the Dress for Less and dd’s DISCOUNTS brands. The company enjoys consistent long-term growth in sales and EPS in both healthy and challenging retail and macroeconomic environments.

Source: ROST Investor Presentation, 3/2018

The company began increasing dividends in 1995 and has established an outstanding record of dividend growth…

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4. SEI Investments Company (SEIC)

SEI is a leading global provider of asset management, investment processing and investment operations solutions, helping professional wealth managers, institutional investors, investment management firms and private investors create and manage wealth.

(Click on image to enlarge)

Source: SEI Investor Presentation 2018

The company has one of the best dividend growth records, compounding dividends at a 25% rate for over 25 years. For the past 10 years, SEIC doubled its free cash flow, net income and even return on assets. At the moment, the stock has a payout ratio of only 20%, with very little debt and abundant cash reserve.


[As mentioned in the opening paragraph, while]…dividend strategy is often considered boring, dividends are the important part of total returns for long-term investors. The dividend players mentioned above have all great track records of rewarding their owners.

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