The investment community has been making use of the DrIP Investing Resource Center's annual list of Dividend Champions for several years now. The list features companies that have increased dividends for more than 25 years -- and with their impressive records of payout performance, analysts have taken notice.

The problem? If analysts already have their collective eye on these top dividend stocks, there's a fair chance that most of the good news has already been priced in to them. A possible solution: Instead of snapping up the dividend champs they're mooning over, try having a look at the ones they may be underestimating ...

First, a brief rundown of how analyst estimates are arrived at. Brokers often try to anticipate a company's future earnings per share. Consensus estimates are the aggregate of these predictions, the average value estimated by all analysts following the stock for the current quarter, the current year, and the next year.

But brokers don't always know best, as evidenced by so-called "earnings surprises." These are the companies whose earnings deviate the most from consensus estimates. Time and time again, they out- or underperform analyst predictions. And the ones that consistently surpass analyst expectations may very well hold some potential.

To create this screen, we started with the list of Dividend Champions -- about 100 companies that have raised their dividends over the past 25 years. We then narrowed down the universe by only focusing on those Dividend Champions that have consistently outperformed Wall Street analyst estimates over the past year. (The calculations can be accessed here.)

How long will their streak continue? You be the judge. (Click here to access free, interactive tools to analyze these ideas.)

Here is the list of underestimated Dividend Champions. Surprise data sourced from AOL Money. The list has been sorted by average surprise relative to analyst estimates.

Company

Dividend Yield

Avg. Surprise vs. Analyst Estimates

Parker Hannifin (NYSE: PH)

1.45%

65.48%
Nucor (NYSE: NUE)

3.55%

48.55%
Northwest Natural Gas (NYSE: NWN)

3.54%

46.55%
Carlisle Companies (NYSE: CSL)

1.88%

45.80%
Tennant (NYSE: TNC)

1.58%

28.25%
Nacco Industries (NYSE: NC)

2.05%

27.74%
RLI (NYSE: RLI)

1.94%

21.63%
Stanley Black & Decker (NYSE: SWK)

2.19%

21.41%
The Valspar Corporation (NYSE: VAL)

1.96%

21.36%

Interactive Chart: Press Play to see how analyst ratings have changed for all the stocks mentioned above.


Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.