Dividend growth investing is a very popular approach which can fit within the ModernGraham methods. This article will look at companies reviewed by ModernGraham which have grown their dividends annually for at least the last 20 years. Out of over 900 companies covered by ModernGraham, only 73 have grown dividends annually for at least the last 20 years.

Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.

The Elite

The following companies have been rated as undervalued and suitable for either the Defensive Investor or the Enterprising Investor:

AFLAC Incorporated (AFL)

AFLAC Incorporated AFL qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.07 in 2014 to an estimated $8.08 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into AFLAC Incorporated revealed the company was trading below its Graham Number of $103.31. The company pays a dividend of $1.74 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 10.92, which was below the industry average of 22.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation)

Cardinal Health Inc (CAH)

Cardinal Health Inc CAH qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.48 in 2014 to an estimated $4.43 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.14% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cardinal Health Inc revealed the company was trading above its Graham Number of $50.88. The company pays a dividend of $1.81 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.78, which was below the industry average of 43.8, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-32.02. (See the full valuation)

Leggett & Platt, Inc. (LEG)

Leggett & Platt, Inc. LEG is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2014 to an estimated $2.35 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Leggett & Platt, Inc. revealed the company was trading above its Graham Number of $23.11. The company pays a dividend of $1.42 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.62, which was above the industry average of 17.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5. (See the full valuation)

Lowe’s Companies, Inc. (LOW)

Lowe’s Companies, Inc. LOW does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.1 in 2015 to an estimated $4.11 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lowe’s Companies, Inc. revealed the company was trading above its Graham Number of $29. The company pays a dividend of $1.58 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 23.9, which was below the industry average of 25.61, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.93. (See the full valuation)

Tanger Factory Outlet Centers Inc. (SKT)

Tanger Factory Outlet Centers Inc. SKT qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.76 in 2014 to an estimated $1.25 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.18% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Tanger Factory Outlet Centers Inc. revealed the company was trading above its Graham Number of $11.47. The company pays a dividend of $1.35 per share, for a yield of 5.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.86, which was below the industry average of 49.54, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.97. (See the full valuation)

Stanley Black & Decker, Inc. (SWK)

Stanley Black & Decker, Inc. SWK qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.09 in 2014 to an estimated $7.32 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Stanley Black & Decker, Inc. revealed the company was trading above its Graham Number of $95.94. The company pays a dividend of $2.42 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 18.45, which was below the industry average of 28.31, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-40.05. (See the full valuation)

The Good

The following companies have been rated as fairly valued and suitable for either the Defensive Investor or the Enterprising Investor:

Air Products & Chemicals, Inc. (APD)

Air Products & Chemicals, Inc. APD is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.94 in 2014 to an estimated $7.66 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.66% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Air Products & Chemicals, Inc. revealed the company was trading above its Graham Number of $85.6. The company pays a dividend of $3.71 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.81, which was below the industry average of 31.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.97. (See the full valuation)

Cullen/Frost Bankers, Inc. (CFR)

Cullen/Frost Bankers, Inc. CFR is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.92 in 2014 to an estimated $5.42 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.25% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cullen/Frost Bankers, Inc. revealed the company was trading above its Graham Number of $84.91. The company pays a dividend of $2.25 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 21.01, which was above the industry average of 20.05. (See the full valuation)

Cincinnati Financial Corporation (CINF)

Cincinnati Financial Corporation CINF qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.69 in 2014 to an estimated $4.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.82% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cincinnati Financial Corporation revealed the company was trading above its Graham Number of $58.26. The company pays a dividend of $2 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.15, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation)

Cintas Corporation (CTAS)

Cintas Corporation CTAS is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.46 in 2014 to an estimated $5.53 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cintas Corporation revealed the company was trading above its Graham Number of $59.9. The company pays a dividend of $1.33 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 30.84, which was below the industry average of 32.93, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-18.65. (See the full valuation)

Hormel Foods Corp (HRL)

Hormel Foods Corp HRL is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.98 in 2014 to an estimated $1.6 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Hormel Foods Corp revealed the company was trading above its Graham Number of $19.56. The company pays a dividend of $0.68 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 22.92, which was below the industry average of 24.35, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.27. (See the full valuation)

People’s United Financial, Inc. (PBCT)

People’s United Financial, Inc. PBCT qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.71 in 2014 to an estimated $1.02 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.13% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into People’s United Financial, Inc. revealed the company was trading below its Graham Number of $21.22. The company pays a dividend of $0.69 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.76, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation)

Ross Stores, Inc. (ROST)

Ross Stores, Inc. ROST is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.62 in 2014 to an estimated $2.77 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 9.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Ross Stores, Inc. revealed the company was trading above its Graham Number of $22.68. The company pays a dividend of $0.54 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 28.22, which was below the industry average of 48.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.86. (See the full valuation)

SEI Investments Company (SEIC)

SEI Investments Company SEC is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.52 in 2014 to an estimated $2.47 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into SEI Investments Company revealed the company was trading above its Graham Number of $25.4. The company pays a dividend of $0.58 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 24.43, which was above the industry average of 21.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.12. (See the full valuation)

T. Rowe Price Group Inc (TROW)

T. Rowe Price Group Inc TROW is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.79 in 2014 to an estimated $5.76 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into T. Rowe Price Group Inc revealed the company was trading above its Graham Number of $60.69. The company pays a dividend of $2.28 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 20.79, which was below the industry average of 22.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.21. (See the full valuation)

Disclaimer:

The author held a long position in People’s United Financial Inc but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here. This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions. Please also read our full disclaimer. This article first appeared on ModernGraham.