10 favorite high-yield aristocrats
All of these companies have boosted their payouts for 25 consecutive years.
Dividend stocks as a group performed relatively well in 2011, thanks to investors' hunger for more cash ﬂow and less volatility. Corporations did their part, boosting dividends at a rate not seen since 2007.
According to Standard & Poor's, dividend increases reached more than $50 billion in 2011, up more than 89% from 2010. Overall, S&P reported 1,953 positive payout actions -- the highest since 2007.
Dividends should continue rising in 2012 for at least four reasons:
- Companies have nearly $2 trillion in cash sitting on their balance sheets. That’s cash that can be used to boost dividends.
- Corporate proﬁts set an all-time high in 2011, and profit growth should continue in 2012. Companies should be willing to share that growing proﬁt pool with shareholders in the form of higher dividends.
- The percentage of corporate proﬁts being paid out in dividends (known as the payout ratio) is 28%, well below the 20-year average of 40%. Said differently, corporate America could boost dividends an aggregate 43% in 2012, and the pay- out ratio would only be back to its 20-year average.
- It is clear investors want dividends. With money markets yielding slightly above zero and many bonds hardly boasting rich yields, investors are desperate for dividends.
S&P releases each year its list of dividend aristocrats, companies that have boosted their dividends annually for at least 25 years.
S&P's High Yield Dividend Aristocrat Index is composed of the 60 highest-yielding constituents of the stocks of the S&P Composite 1500 Index that have increased dividends every year for at least 25 consecutive years.
The list contains a number of our favorite DRIPs (dividend reinvestment plans). I’m especially fond of ExxonMobil (XOM), PepsiCo (PEP), Procter & Gamble (PG), and Walgreen (WAG).
Not only has each of these firms boosted dividends annually for more than a quarter century, but the dividend-growth rate has been impressive.
I’ve owned each of the stocks for a long time, and those rising dividend streams have been especially beneﬁcial in building up my share count via dividend reinvestment.
I would feel comfortable buying all four stocks at current prices, especially Walgreen, which is depressed and offering a particularly good buying opportunity for long- term investors.
Other favorites among the dividend aristocrats include insurers Aﬂac (AFL) and Chubb (CB); Wal-Mart Stores (WMT); health-care companies Abbott Laboratories (ABT) and Medtronic (MDT); and diversified conglomerate Dover (DOV). All of these stocks are good buys at current prices.
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