Meet the Dow's magnificent 7

Among the 30 stocks, these have boosted their dividends in each of the past 30 years.

By TheStockAdvisors Mar 29, 2013 4:53PM
By Barney Brodie, The Outlook

Consider these facts: The Dow recently hit an all-time high. U.S. corporations have record levels of cash and are increasingly bestowing it on shareholders as dividends. And investors are yield-hungry as the bond market offers historically low yields.

Analyst Howard Silverblatt considered those facts and decided to look through the 30 stocks in the Dow for those that have increased their dividends annually for at least 30 years. The result is what Silverblatt has dubbed the Dow 30-30 or the magnificent seven.

The concept is similar to the Dividend Aristocrats compiled by S&P Dow Jones Indices. Silverblatt notes there are 105 issues in the S&P 1500 Dividend Aristocrats.

To be an S&P 1500 Dividend Aristocrat, a company must be a constituent of the S&P 1500, and it must have increased its dividend every year for the past 20 years. There are 54 issues in the S&P 500 Dividend Aristocrats, which must have at least 25 years of annual increased dividend payments.

Silverblatt notes the S&P 500 indicated annual dividend rate has reached $300 billion for the first time ever. "The record $300.2 billion indicated annual dividend rate for the 500 companies in the index is 18.8% above the June 2008 level of $252.7 billion, its last peak before it began its decline," he says. "It is 59.5% above its $188.2 billion bottom level it reached in July of 2009."

"U.S. companies are showering investors with a record windfall in the form of dividends and share buybacks, helping to propel the stock market’s rally,” The Wall Street Journal said on March 8, adding “the Federal Reserve... said 17 of the largest U.S. financial groups have enough capital to keep lending even if the economy were to take a sharp downturn. Several banks are now expected to boost dividends and share buybacks."

That represents a significant turnaround for the financial services sector, where many companies were forced to cut their dividends in the aftermath of the financial crisis in 2008/2009.

While many investors may be looking for income from financial services equities, a different approach would be to stick with the long-term consistent dividend payers.

For example, "if you would have invested $1,000 in each of the magnificent seven at the end of 1982, your $7,000 investment would have been worth $425,581 at the end of 2012, a 14.7% annualized return," Silverblatt says.

The Dow Jones Industrial Average is dividend rich to begin with, boasting a higher current yield (2.5%) than the yield on the S&P 500 index (2.1%).

Here are the magnificent seven from within the Dow:

3M (MMM)
Coca-Cola (KO)
Exxon Mobil (XOM)
Johnson & Johnson (JNJ)
McDonald’s (MCD)
Procter & Gamble (PG)
Wal-Mart Stores (WMT)

Silverblatt says stock dividend yields are currently competitive with many fixed income investments. "Investors have few choices as income remains low," he says. He thinks the new tax rates arising out of the fiscal cliff negotiations are a blessing for individual investors.

Under the fiscal cliff compromise reached several months ago, dividend taxes will rise to 20% this year from 15% only for people making more than $450,000 a year; those earning less will still pay 15%. Dividend recipients dodged a big tax hit: dividend tax rates were scheduled to rise to 39.6% before the fiscal cliff deal was struck.

Silverblatt also points out corporate payouts are low at 36% compared to the historical 52% rate. "Corporate cash is at an all-time high, with strong cash-flow, even as earnings have recently lacked growth," he says.

More from TheStockAdvisors.com
35Comments
Mar 30, 2013 1:50AM
avatar
These are some of the biggest companies on the planet, and have gobs of cash, but, too bad they fail to distribute above 4%. Expensive stocks that dole out in the 3% range IMHO is dung to me. I search and find many stockes that are good and growing in their respective markets, and reward investors far more. For the retiree, these stocks mentioned here fit the bill. Much more safety, albeit smaller returns.

  Good case the companies have huge amounts of cash, as they don't give their employees enough raises, and horde their cash. So in essence, stiff their stock holders.   You can be sure their managers are paid sky high pay and perk packages.

Mar 30, 2013 10:12AM
avatar

Actually, although these are good long term investments over all....

I would like to see a list of the TOP 100 Companies paying dividends in a descending order of dividend paid and largest percentage on a trailing 4 quarters...

Simple Criteria....SHOULD APPLY..

A Market cap cut off...

Share price cut off of $4 (in case of recent lower prices) or have 2 brackets, over and under $10.

Company has paid divs for at least 5 years, probably longer.?

Dividends should be over 1.5% average for 5 years.

Number of years of increasing dividend.if any.?

Could/should include....Standard equities,REITS,MLPs,LPs,Foreign equities and maybe (??) EFTs or MFunds..

Pretty straight out and simple:

Company/Fund...Symbol...Price(recent)...Div$ and %...P/E...Incr'g Div...And maybe SS rating??

It's EASY.... MSN, we've got over 20 and none on your above list...So that's at least 27..

 

I would find something of this nature, on a Financial/Investment Site...Much more interesting, than why does WalMart have some empty shelves ??......Just sayin.. 

Mar 29, 2013 11:17PM
avatar
If you any or all of these for 5 years or more you`ll do fine.
Mar 31, 2013 2:28PM
avatar
If you hold JNJ - Better keep it no matter what some on  line analyst said
Mar 29, 2013 11:25PM
avatar

I like all of them, but think there are some that are as good or might be better...Just saying.

Pretty much sounds like something from Buffet's Playbook....Past and Present.

Apr 1, 2013 1:26PM
avatar
All good companies, but the price run-up since 2009 has cut their yields to less than 3%.  Wait until the next major correction and buy them on sale.  In keeping with the same theme, you can now buy other high quality companies such as INTC, COP, LMT, T, LO, KMP, and HE, all yielding above 4%.  Re-invest the dividends, and you'll outperform many over-priced mutual fund managers over the long haul.  The next time the market crashes, pick of some more.
Mar 31, 2013 2:58PM
avatar
The better, more extensive list is called "Dividend Champions". Dividend Aristocrats include only S&P stocks. The Champions list has a lot more. It is amazing how many lil old companies you never heard of have increased their dividends every year for 30, 40 years and more. Just plug into a search engine.
Apr 1, 2013 12:19AM
avatar
These are all great companies to invest in for the long haul, only if their government is living within their means
Apr 1, 2013 8:37AM
avatar
3M and Coke are on my radar for after the next big crash. Maybe PG as well.
Mar 31, 2013 6:48PM
avatar

Yup there are several List like the "Champions", Aristocrats, Mag. 7, and such..

If we were Berkshire, we probably could own many...But we are not, and we settle on the best choices that we can make and are comfortable with....Plus affordability.

 

Many Financial sites, offer "Stock Screeners" that can be used to narrow your choices to fit your needs and give you top notch selections for a person to pick...

 

The groups number in the thousands....And several are merely duplications, so the ticket I recommend is diversity, into several sectors..With stalwarts, good payers and somewhat solid companies.

Mar 31, 2013 2:21PM
avatar

ConocoPh..(COP), certainly nothing bad, a great play in the Oil patch, 4.5% payout and a P/E of 10.

@ $60 about mid range it's hi/lo of 50-77, the p/e way below S&P average of about 15-16.

I have been looking at this seriously, for additional Sector position...Might consider on dip.??

Have been coming away from CHK, leaving a bad taste, because of past CEO. bullshidt.

Have Statoil (STO) and pipelines in sector, but looking at a domestic for more exposure...?

 

Wells Fargo...Probably one of the best in Financial plays...

One of Warren Buffet's top picks...I like it and another regional Fifth Third(FTHB) for banking stocks, but own neither at this time.

 

20 year CDs are a long time, but the Rates are pretty decent, probably take 5-7 years to get back up to that....We have never carried CDs over a 30 month period, usually about 12-13m..tops.

Put some in for 30m, for G-kids, GG-kids,because of rates.

 

If it were me...I would consider diversifying a little more into Retail and Tobacco( such as Altria(MO)

Go for the higher divs.....Home Improvement and Tobacco have been our best investments for two-four years running..

Apr 1, 2013 1:01PM
avatar

Tog:  I've always held Exxon or Conocco.  It helps with anger management when I'm stuck in a traffic jam.  I figure, oh well, everybody is using up gas and I'm making money.

 

I used to hold a lot of REITS:

 

Annaly

Gladstone

SL Green

Gramercy Capital

Tanger Factory

 

I liquidated REITS in 2007.  Most of them were commercial real estate and a bit more secure than residential, but real estate was still giving me the creeps.  I moved into trust preferred stocks, many of which were also REITS:

 

Ashford Hospitality

Felcor Lodging

Gladstone Commercial

Biomed Realty

 

Yes, owning a home is a young man's game.  I'm so tired of pulling weeds.

 

 

Apr 1, 2013 10:56AM
avatar
Put that question on Cramer's blog....There are some there, that may have an opinion.
Apr 1, 2013 4:08PM
avatar
And then "Bend over Ben" gets "pensioned" out and what happens to these so called high yielding turds then? You lose your ****. Bernanke is "making" the stock market until he can no longer get away with it. Then reality 101 sets in and you're screwed right to left. This is in essence a Gestapo-like ruse by Bernanke. How stupid can people be???
Apr 1, 2013 12:09PM
avatar
Well, let's see . . . these seven stocks are all at or near their 52-week highs and, with the notable exception of MCD, are paying out 2.5% or less in annual dividends.  

Moreover, almost anyone that can afford stocks will pay a minimum of 20%---and more likely something like 30%---in Federal tax on dividend payouts.  Your mileage will varying if you have state income taxes.  So, your kept-earnings from any of these companys' dividend payouts is almost certain to be less than 2%.

The BLS-reported rate of inflation (CPI-U) for last 12 months is 2.0%, but everyone knows these numbers are artificially depressed . . . real inflation as experienced by the average Joe on the street is about twice this, say around 4%.

So, big downside risk in valuation plus effective dividend income that doesn't even keep up with inflation.  Magnificient? . . . hardly!
Mar 31, 2013 6:56PM
avatar

I hope everyone had a nice Easter and Holiday weekend...

Plenty of Ham,Turkey,Easter eggs and Chocolate...

We start a new quarter..Tomorrow....Good luck.

Apr 1, 2013 1:24PM
avatar
The Fed and Ben giving banks free money thanks tax payers.
Mar 30, 2013 10:37PM
avatar

 

Just sayin' Tog.  I love GAIN.  But . . . real estate?  Bustin' my chops.

 

So let it be written, so let it be done.

 

Hey Tog!  Give me your take on Gladstone Commerical.  Currently, I'm putting everything into Conocco and Wells Fargo 20-year CD's paying over 3%.  Let me know what you think.  I do admire your advice, seriously.

Apr 1, 2013 9:22AM
avatar

Annon225........This is MSN Money...Top Stocks or Investor Beat...

 

If you feel that way....Why the Hell do you even come to a Site like this ??

 

The Fishing, God, Guns and Bullets Site...is TWO Clicks back....Gitter Done...See ya. 

Mar 31, 2013 1:35PM
avatar

Ice.......Outright Real Estate and/or land is a young person's game....Say under 50-60.??

If rental or lease property, lot's of work, sometimes headaches? But can be rewarding..

I started thinking at looking at "tax sale properties" over the last 2-4 years...Wife said NO..

Usually much less then foreclosures,sometimes need repairs..I would have to hire most/all done.

But anyway...

Gladstone(GOOD) is a REIT...So you are not straying too far, from real estate?

Staying in a tight range of the 52 wk. hi/lo (on high end @19.5) Many REITs are also.

Paying 7.7%..Good place to park some cash, has a Neutral ranking....

Most Reits should do pretty good for another year or two, because of FED's interest rate control.

Raising rates,would probably place most REITs in a defense mode...They have to be watched for that.

There are many to chose from...We have 3 for the time being..AGNC,NLY and MTGE.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

105
105 rated 1
271
271 rated 2
420
420 rated 3
633
633 rated 4
492
492 rated 5
532
532 rated 6
725
725 rated 7
515
515 rated 8
343
343 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
SWNSOUTHWESTERN ENERGY COMPANY10
TAT&T Inc9
COPCONOCOPHILLIPS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.