One way to see if an investor is paying too much for a stock is by looking at the stock's PEG. It's the multiple of the earnings growth rate and ideally you'd like to pay less than the growth rate, or a PEG <1. The other thing to look at is the payout ratio. Any company that's paying out more than 100% of earnings in dividends can't continue to do that for long because they're either shrinking the company or borrowing the money. And that's not good for the long term holder.
Below is a list of companies that many Dividend Growth Investors like to invest in and it shows the current yield, PEG and Payout Ratio. Hopefully this will give me a few ideas for further research and steer me away from some companies that really should be left for others to invest in.
Company 3M Co. Abbott Laboratories AbbVie AFLAC Air Products & Chemicals Archer Daniels Midland AT&T Automatic Data Processing Becton, Dickinson Bemis Company Brown-Forman Cardinal Health Chevron Cincinnati Financial Cintas Colgate-Palmolive Consolidated Edison CR Bard Dover Ecolab Emerson Electric Exxon Mobil Franklin Resources Genuine Parts HCP Hormel Foods Illinois Tool Works Johnson & Johnson Kimberly-Clark Leggett & Platt Lowe's Companies McCormick & Co McDonald's McGraw Hill Financial Medtronic Nucor Pepsico PPG Industries Procter & Gamble Stanley Black & Decker Sysco T. Rowe Price Group Target The Chubb Corp The Clorox Co The Coca-Cola Co The Sherwin-Williams Co V.F. Corp W.W. Grainger Walgreen Wal-Mart | Yield 2.92% 2.56% 4.10% 2.89% 2.72% 3.26% 5.72% 2.71% 1.85% 2.53% 1.50% 1.85% 5.21% 3.31% 1.24% 2.43% 3.91% 0.53% 2.90% 1.34% 4.31% 3.91% 2.14% 3.13% 6.21% 1.48% 2.62% 3.06% 2.81% 3.17% 1.58% 2.06% 3.08% 1.49% 2.06% 4.12% 2.89% 1.52% 3.49% 2.28% 3.12% 3.18% 3.14% 1.77% 2.44% 3.18% 1.11% 2.54% 2.40% 1.78% 3.08% | PEG 2.49 2.38 1.81 3.70 1.42 8.00 6.67 2.50 3.11 2.20 3.57 1.59 ---- ---- 1.96 3.46 6.03 10.08 3.06 2.26 1.81 ---- ---- 3.46 22.30 1.71 2.08 3.51 10.68 1.60 1.31 3.71 3.03 ---- 5.62 1.81 4.67 1.86 2.99 1.56 4.43 1.71 1.53 2.73 3.61 9.34 1.27 2.23 3.95 1.42 11.36 | Payout Ratio 49.90% 31.70% 113.40% 27.20% 53.80% 37.40% 126.40% 61.40% 69.20% 44.80% 38.40% 35.00% 92.40% 46.30% 37.10% 54.90% 68.80% 25.10% 28.80% 34.80% 46.70% 60.00% 14.30% 52.00% 430.80% 38.50% 39.30% 54.80% 212.20% 66.10% 32.10% 50.30% 73.10% 995.50% 70.60% 75.60% 79.90% 32.20% 96.00% 41.30% 109.10% 42.30% ---- 25.30% 59.40% 82.00% 24.10% 52.50% 30.50% 33.70% 41.70% |