10 New 'Dividend Aristocrats' Arrive for 2012

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) -- 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 -- Supervalu ( SVU) and 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))

Of course, 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.

AT&T

Company Profile: AT&T ( T) is a holding company whose subsidiaries and affiliates provides wireless and wireline telecommunications services and equipment as well as directory advertising and publishing services in the United States and internationally.

Liability Adjusted Cash Flow Yield: 4.20%

Dividend Yield: 5.90%

Dividend Acid Test: Fail

TheStreet Ratings' Grade: Buy (A-) -- AT&T's gross profit margin for the third quarter of its fiscal year 2011 is essentially unchanged when compared to the same period a year ago. Sales and net income have dropped, underperforming the average competitor within its industry. AT&T has weak liquidity. Currently, the Quick Ratio is 0.71 which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow.

During the same period, stockholders' equity ("net worth") has remained unchanged from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.

Company Profile: HCP ( HCP) is a self-administered, real estate investment trust that acquires, develops, leases, manages and disposes of health care real estate and provides financing to health care providers.

Liability Adjusted Cash Flow Yield: 0.36%

Dividend Yield: 5.05%

Dividend Acid Test: Fail

TheStreet Ratings' Grade: Buy (A+) -- HCP's gross profit margin for the third quarter of its fiscal year 2011 has increased when compared to the same period a year ago. The company has grown sales and net income significantly, outpacing the average growth rates of competitors within its industry.

At the same time, stockholders' equity ("net worth") has greatly increased by 50.50% from the same quarter last year.

Sysco

Company Profile: Sysco ( SYY) through its subsidiaries and divisions, is a distributor of food and related products mainly to the foodservice or 'food-away-from-home' industry.

Liability Adjusted Cash Flow Yield: 3.16%

Dividend Yield: 3.71%

Dividend Acid Test: Fail

TheStreet Ratings' Grade: Buy (A-) -- Sysco's gross profit margin for the first quarter of its fiscal year 2012 is essentially unchanged when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago. Sysco has weak liquidity. Currently, the Quick Ratio is 0.93, which shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year.

During the same period, stockholders' equity ("net worth") has increased by 16.91% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.

Nucor

Company Profile: Nucor ( NUE) and its affiliates are manufacturers of steel and steel products, with operating facilities and customers mainly located in North America.

Liability Adjusted Cash Flow Yield: 6.82%

Dividend Yield: 3.52%

Dividend Acid Test: Pass

TheStreet Ratings' Grade: Hold (C+) -- Nucor's gross profit margin for the third quarter of its fiscal year 2011 has significantly increased when compared to the same period a year ago. The company grew its sales and net income significantly quarter vs. same quarter a year prior, and was able to outpace the average competitor in the industry when comparing net income growth but not when comparing revenue growth. Nucor has strong liquidity. Currently, the Quick Ratio is 1.80, which shows the ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year, indicating deteriorating cash flow.

At the same time, stockholders' equity ("net worth") has remained virtually unchanged, increasing by only 3.25% from the same quarter last year. The key liquidity measurements indicate that the company is unlikely to face financial difficulties in the near future.

Illinois Tool Works

Company Profile: Illinois Tool Works ( ITW) is a manufacturer of a range of industrial products and equipment. Its segments are: industrial packaging; power systems and electronics; transportation; construction products; food equipment; polymers and fluids; and decorative surfaces.

Liability Adjusted Cash Flow Yield: 5.93%

Dividend Yield: 3.05%

Dividend Acid Test: Pass

TheStreet Ratings' Grade: Buy (B) -- Illinois Tool Works' gross profit margin for the third quarter of its fiscal year 2011 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago; however, it was unable to keep up with the growth of the average competitor within its industry. Illinois Tool Works has average liquidity. Currently, the Quick Ratio is 1.18, which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year.

During the same period, stockholders' equity ("net worth") has increased by 10.77% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future.

Genuine Parts Co.

Company Profile: Genuine Parts Co. ( GPC) is a service organization, which is engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials.

Liability Adjusted Cash Flow Yield: 4.40%

Dividend Yield: 2.99%

Dividend Acid Test: Pass

TheStreet Ratings' Grade: Buy (A+) -- Genuine Parts' gross profit margin for the third quarter of its fiscal year 2011 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the growth of the average competitor within its industry. Genuine Parts Co. has weak liquidity. Currently, the Quick Ratio is 0.92, which shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year.

At the same time, stockholders' equity ("net worth") has remained virtually unchanged, increasing by only 4.06% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.

Medtronic

Company Profile: Medtronic ( MDT) provides innovative products and therapies for use by medical professionals to meet the health care needs of their patients.

Liability Adjusted Cash Flow Yield: 6.06%

Dividend Yield: 2.70%

Dividend Acid Test: Pass

TheStreet Ratings' Grade: Buy (B-) -- Medtronic's gross profit margin for the second quarter of its fiscal year 2011 is essentially unchanged when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. Medtronic has average liquidity. Currently, the Quick Ratio is 1.27, which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow.

During the same period, stockholders' equity ("net worth") has increased by 12.91% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future.

Colgate-Palmolive

Company Profile: Colgate-Palmolive ( CL) manufactures and markets a number of products in the U.S. and around the world in two distinct business segments: oral, personal and home care; and pet nutrition.

Liability Adjusted Cash Flow Yield: 3.71%

Dividend Yield: 2.56%

Dividend Acid Test: Pass

TheStreet Ratings' Grade: Buy (A) -- Colgate-Palmolive's gross profit margin for the third quarter of its fiscal year 2011 is essentially unchanged when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago. Colgate-Palmolive has weak liquidity. Currently, the Quick Ratio is 0.62, which shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having weak liquidity to begin with. This would indicate deteriorating cash flow.

During the same period, stockholders' equity ("net worth") has remained unchanged from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.

T. Rowe Price

Company Profile: T. Rowe Price ( TROW) financial services holding company, which through its subsidiaries provides investment advisory services to individual and institutional investors in the sponsored T. Rowe Price mutual funds and other investment portfolios.

Liability Adjusted Cash Flow Yield: N/A -- Investment companies and insurance operations are too complex to value with a simple cash flow formula.

Dividend Yield: 2.14%

Dividend Acid Test: N/A

TheStreet Ratings' Grade: Buy (B) -- T. Rowe Price's gross profit margin for the third quarter of its fiscal year 2011 is essentially unchanged when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago.

During the same period, stockholders' equity ("net worth") has increased by 6.69% from the same quarter last year.

Franklin Resources

Company Profile: Franklin Resources ( BEN) is an investment management company that offers investment choices under the Franklin, Templeton, Mutual Series, Bissett, Fiduciary and Darby brand names.

Liability Adjusted Cash Flow Yield: N/A -- Investment companies and insurance operations are too complex to value with a simple cash flow formula.

Dividend Yield: 0.99%

Dividend Acid Test: N/A

TheStreet Ratings' Grade: Buy (B) -- Franklin Resources' gross profit margin for the fourth quarter of its fiscal year 2011 has increased when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago.

During the same period, stockholders' equity ("net worth") has increased by 10.32% from the same quarter last year.

>>To see these stocks in action, visit the 10 New Dividend Aristocrats for 2012 portfolio on Stockpickr.

-- Written by John DeFeo in New York City

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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