Top 10 Dividend Champions: Price to Book (P/B)

Price to Book Value

As Warren Buffet was quoted in the previous post:  Price is what you pay.  Value is what you get.

You might think of a firm’s Price to Book ratio in a similar manner.  Price is the money you pay per share.  Book Value may be thought of as the company’s net assets, if the company were liquidated, distributed to stock holders on a per share basis.

Let’s say you pay $100 a share for the stock of a company.  The next day the company is liquidated and the proceeds from the sale of all its assets are used to pay off its liabilities.  Whatever’s left is then divided among the shares outstanding, paid to the holders of record.  If the proceeds paid per share are $50 then the Price ($100) to Book ($50) ratio would be 2:1.

As you can see, you don’t want to pay much more than the book value of a firm as a hedge against the worst case scenario.  Ben Graham and Warrant Buffett advocated that value investors pay no more than twice the book value of a firm and preferably less than that.

What is the Price to Book Ratio?

If you can find a firm in which the price paid per share is less than the book value per share you’re essentially buying one dollar for a handful of pennies.  And if that company is paying a dividend, better yet a dividend that’s been growing every year, so much the better!

Below are the 10 Dividend Champions with the lowest P/B ratio as of 1.31.19.  As you can see, the top 3 firms were actually available for pennies on the dollar and have increased their dividends every single year for 25+ years!

Company	P / B
Telephone & Data Sys.	0.89
NACCO Industries	0.98
People's United Financial	0.98
Universal Corp.	1.09
Old Republic International	1.13
United Bankshares Inc.	1.13
First Financial Corp.	1.19
AT&T Inc.	1.19
Chubb Limited	1.21
Community Trust Banc.	1.31

As with other factors discussed here, here, here, and here, Price to Book should not be the only one you consider in deciding where to plant your seed money.  However, the best value investors in the world pay a great deal of attention the price they’re paying relative to the value they’re receiving.  A wise Dividend Farmer will do the same.

The thoughts and opinions expressed here are those of the author, who is not a financial professional.  Perspectives offered should not be considered investment advice.  They are presented for discussion and entertainment purposes only.  For specific investment advice or assistance, please contact a registered investment advisor, licensed broker, or other financial professional.