NEW YORK (Scott's Investments) -- Standard & Poors recently announced its 2011 Dividend Aristocrats. The S&P 500 Dividend Aristocrats Index is designed to measure the performance of S&P 500 constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 25 years.

The deletions from the 2010 list are Eli Lilly (LLY), Supervalu (SVU) and Integrys Energy (TEG). The additions are McCormick (MKC), Hormel Foods (HRL) and Ecolab (ECL).

I have the full list available on the right hand side of Scott's Investments along with the dividend yield for each stock. Using a simple stock ranking system, I have rated each dividend aristocrat based on a one-third weighting for yield, one-third weighting for payout ratio and one-third weighting for projected annual earnings-per-share growth for the next five years. For those interested in how to create their own stock ranking system I provide detailed instructions in here.

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    There are an almost infinite number of ways to rank stocks. For dividend investors, yield, EPS growth and payout ratio are three critical metrics. I ranked each Aristocrat in order of yield (highest to lowest), five-year estimated EPS growth (highest to lowest) and then payout ratio (lowest to highest) and averaged these rankings to create an overall rank.

    It is important to note that raw data is but one tool to use in your overall analysis. For example, payout ratios can fluctuate since they are calculated by dividing dividends per share by earnings per share. A short-term dip in earnings could inflate the current payout ratio of a stock. Thus, it is important to evaluate not only the current payout ratio of a stock but also whether a company's future earnings growth will continue to fund dividend payouts (thereby potentially lowering the payout ratio in the future). In addition, estimated five-year EPS growth is only that: an estimate provided by analysts. The reality is that the next five years will provide both earnings surprises and disappointments for most of the companies on the list.

    The following is the result when averaging the ranking of current yield, projected five-year EPS growth and current payout ratio among the 2011 Dividend Aristocrats. The stocks are listed in order of their ranking.

    Data source: Finviz

    At the time of publication, author had no positions in stocks mentioned.

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