Looking for dividends in this era of low interest rates? Here are four stocks that look like they are going to increase dividends.
In the latest monthly update to our dividend health ratings for September, Reality Shares Advisors identified four new companies that earned our most elite dividend health rating, DIVCON 5, which is designed to indicate those companies most likely to increase their dividends within 12 months. Conversely, one company fell into the lowest dividend health category, DIVCON 1, which indicates those companies most likely to cut their dividends within 12 months.
The newest companies to achieve our healthiest dividend rating are Avago Technologies(AVGO) - Get Report , Hartford Financial Services(HIG) - Get Report , Snap-On(SNA) - Get Report , and Tesoro (TSO) , all of which rose one notch in our DIVCON ratings in September compared to the prior month. They join a prestigious group, with less than 10 percent of S&P 500 companies currently scoring high enough to qualify. In fact, Cintas(CTAS) - Get Report fell below the DIVCON 5 threshold in September, although its score is still indicative of a healthy dividend. For context, companies that achieved a DIVCON 5 rating increased their dividends within 12 months 96.6% of the time, and none cut their dividends, according to the results of our research from 2001 through 2014.
Source: Reality Shares Research
At the other end of the spectrum, Marathon Oil(MRO) - Get Report fell one notch to DIVCON 1, our lowest dividend health rating, which is designed to indicate those companies most likely to cut their dividends within 12 months. In our research of the 500 largest U.S. stocks by market capitalization from 2001 through 2014, companies that were downgraded to DIVCON 1 cut their dividends within a year 34.9% of the time. Three companies -- EQT Corporation(EQT) - Get Report , Transocean(RIG) - Get Report , and CenturyLink(CTL) - Get Report -- earned scores in September that were high enough to rise out of DIVCON 1, leaving only eight S&P 500 companies currently with the lowest dividend health rating: CONSOL Energy(CNX) - Get Report , Hudson City Bancorp (HCBK) , Freeport-McMoRan(FCX) - Get Report , Frontier Communications(FTR) - Get Report , FirstEnergy(FE) - Get Report , Wynn Resorts(WYNN) - Get Report , Newmont Mining(NEM) - Get Report and now Marathon Oil.
Source: Reality Shares Research
DIVCON is our dividend health rating system which assesses the likelihood that companies will grow or cut their dividends within 12 months. Like the U.S. DIVCON uses a five-tier rating system to provide snapshot of companies' dividend health, where DIVCON 5 indicates the highest probability for a dividend increase and DIVCON 1 the highest probability for a dividend cut. Companies' ratings are based on a weighted average of seven factors which measure the relationship between historic dividend trends, cash flow and earnings, buybacks, as well as consensus forecasts and external financial ratings.
You can see how your dividend stocks stack up in our methodology using our free interactive DIVCON tool, which incorporates ratings for hundreds of companies.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned. This article represents the opinion of Eric Ervin and may not represent the view of Reality Shares.