Investing 101: Dividend Champions With Encouraging Inventory Trends

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Many companies rely on sales as their primary source of earnings, so analyzing a company's sales is usually a very important part of overall analysis. For ideas on how to start your own look into a company's sales, we ran a screen.

We began by screening a universe of "dividend champions" from DRiP Investing. These stocks have consistently raised their dividends over the past 25 years, which may indicate dividend sustainability going forward.

We then screened for those stocks with encouraging sales trends, with higher growth in revenue than inventory year over year, as well as inventory comprising a smaller portion of current assets over the same time period.


To understand why these trends are positive, think why the opposite trends would be negative. If a company sees higher growth in inventory than revenue, it may indicate that the company is having trouble selling its inventory. Although management may just have decided to hold more inventory in anticipation of greater future sales.

Business section: Investing ideas
Below are the final results from this stock screen. These dividend champions have seen positive trends in sales relative to inventory over the past year.

Do you think these companies will continue to see strong sales trends? If so, do you think they will continue to increase their dividends?

Use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)

1. Genuine Parts (NYS: GPC) : Distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, Canada, and Mexico. Dividend yield at 3.22%, payout ratio at 49.82%. Revenue grew by 7.35% during the most recent quarter ($3,014.14M vs. $2,807.73M y/y). Inventory grew by 1.68% during the same time period ($2,262M vs. $2,224.72M y/y). Inventory, as a percentage of current assets, decreased from 50.39% to 49.43% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31)

2. Illinois Tool Works (NYS: ITW) : Manufactures a range of industrial products and equipment worldwide. Dividend yield at 2.53%, payout ratio at 33.97%. Revenue grew by 10.36% during the most recent quarter ($4,319.31M vs. $3,913.75M y/y). Inventory grew by 4.95% during the same time period ($1,715.86M vs. $1,634.86M y/y). Inventory, as a percentage of current assets, decreased from 27.38% to 25.05% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31)

3. Nacco Industries (NYS: NC) : Engages in lift trucks, small appliances, specialty retail, and mining businesses primarily in the Americas, Europe, and the Asia-Pacific. Dividend yield at 1.87%, payout ratio at 10.98%. Revenue grew by 9.82% during the most recent quarter ($951.3M vs. $866.2M y/y). Inventory grew by 5.12% during the same time period ($470.3M vs. $447.4M y/y). Inventory, as a percentage of current assets, decreased from 36.85% to 34.2% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31)

4. Sherwin-Williams (NYS: SHW) : Engages in the development, manufacture, distribution, and sale of paints, coatings, and related products primarily in North and South America, the Caribbean region, Europe, and Asia. Dividend yield at 1.45%, payout ratio at 35.13%. Revenue grew by 9.22% during the most recent quarter ($2,070.44M vs. $1,895.62M y/y). Inventory grew by 0.99% during the same time period ($926.81M vs. $917.7M y/y). Inventory, as a percentage of current assets, decreased from 41.46% to 40.98% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31)

5. Weyco Group (NAS: WEYS) : Engages in the distribution of men's foot wear primarily in the United States, Canada, Europe, Australia, Asia, and South Africa. Dividend yield at 2.67%, payout ratio at 46.35%. Revenue grew by 20.01% during the most recent quarter ($74.8M vs. $62.33M y/y). Inventory grew by 11.73% during the same time period ($62.69M vs. $56.11M y/y). Inventory, as a percentage of current assets, decreased from 50.33% to 48.89% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Alexander Crawford does not own any of the shares mentioned above. Accounting data soured from Google Finance.

At the time this article was published Motley Fool newsletter services have recommended buying shares of Sherwin-Williams and Illinois Tool Works. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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