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NEW YORK ( TheStreet) -- Among the most noble of dividend stocks are Standard & Poor's Dividend Aristocrats -- a collection of companies that have raised dividend distributions for 25 years or more.
But for 2012, aristocratic changes are afoot.
As of Dec. 16, 2011,
S&P will change the methodology of the Dividend Aristocrats index. Now, only regular dividends will count toward a year-end payout tally; special dividends will be ignored.
The index will also rebalance to include
10 new entrants; one stock --
CenturyLink(CTL - Get Report) -- will fall off the ranks. This omission should come as no surprise to regular readers,
CenturyLink failed our dividend acid test in 2010.
Similarly, two of the three stocks dropped from last year's index --
Integrys(TEG) -- also failed our acid test (
Eli Lilly(LLY) passed our test, but was still dropped from the index in 2011).
To help you decide whether or not the newest Dividend Aristocrats will make a worthwhile addition to you portfolio, the following pages contain 10-year snapshots of each company's market performance. Also, we will explore each company's valuation and assign a PASS or FAIL dividend score.
Pass = Dividend yield less than LACFY, Fail = Dividend yield greater than LACFY
To determine liability adjusted cash flow yield, a "short formula" was used, defined as:
5-Year Average Free Cash Flow / ((Outstanding Shares x Per Share Price) + (Liabilities - Cash))
a failing grade does not ensure that a dividend cut or elimination is imminent, but rather, that the failed company may have difficulty continuing payouts in the face of operational adversity or a large debt maturity. Similarly, a passing grade offers no guarantee that a company will not face a prolonged hardship or that the company's management will sustain its current dividend policy. Investors must always be cautious.
To get a more rounded view of each company's financial situation, the following pages include TheStreet Ratings' financial analysis and stock rating for each respective company. All of this data, when considered together, may help you decide the investment potential of the newest Dividend Aristocrats.