10 Stocks for a Scary Market

Would you like some security in your portfolio?

Stock investors have had a lot to be nervous about lately. The collapse of Wall Street cornerstone Bear Stearns reminded investors that no company is immune from trouble.

Yet in tough times, it pays to remember your long-term focus. The nine months since the market last set record highs may seem like forever, but it's an instant compared to the successful track records of our nation's strongest companies. And although they're painful to go through, downturns are part of what every long-term investor will face over the years.

One way to make your portfolio more solid is to look for companies that have proved their financial stability by paying dividends. Further down in this article, I'll highlight the 10 stocks that have the longest history of increasing their dividends every year. Several of these companies have raised dividends for more than 50 years -- and some of their names may surprise you.

The power of dividends
As we're all painfully aware of by now, stock prices rise and fall sharply, often for no apparent reason. A stock that looks healthy and strong one year may come down to Earth the next. Accounting scandals have made investors question the dependability of reported financial results.

Dividends, however, are the one tangible, permanent sign of a company's success. To pay a dividend, a company has to have cold, hard cash. To raise its dividend over the years, a company has to keep growing, so it can produce more cash flow to support shareholder payments. Most importantly, any company that can raise its dividend even during hard times, such as the 1973-74 bear market and the stagflationary period in the late 1970s and early 1980s, has proved that it can get through the same problems many businesses face today.

As you'll see below, dividend-paying companies also sport attractive overall returns. Several studies show that dividend payers have outperformed their non-dividend-paying counterparts over the long haul -- and with less volatility.

The top 10
Here are the 10 companies with the longest history of raising dividends:

Company

Years of Dividend Increases

Current Dividend Yield

20-Year Annualized Return

American States Water (AWR)

53

3.0%

12.4%*

Diebold (NYSE: DBD  )

53

2.5%

11.2%

Procter & Gamble (NYSE: PG  )

53

2.4%

16.7%

Dover (DOV)

51

1.5%

11.7%

Emerson Electric (NYSE: EMR  )

50

2.1%

16.2%

Genuine Parts (NYSE: GPC  )

50

3.5%

11.3%

Parker Hannifin (NYSE: PH  )

50

1.0%

15.4%

3M (NYSE: MMM  )

48

2.6%

11.8%

Integrys Energy (TEG)

48

5.2%

10.8%

Masco (NYSE: MAS  )

48

5.0%

4.1%

Sources: Mergent's Dividend Achievers, Yahoo! Finance.
*Figure represents an 18-year annualized return; stock price before 1990 is not available.

Although some of these companies are household names, you may never have heard of some of them. Yet many have some impressive track records, not only in their dividend histories but also in their total returns. Over the same 20-year period, the S&P 500 rose just a little more than 11%.

Notice, too, that many of these companies aren't paying huge dividend yields. That's proof of the discipline of a company's management to make realistic assessments of the company's long-term prospects and its need for cash to invest back into the business.

A good place to start
If the idea of reasonable returns with a smoother ride appeals to you, dividend investing might be worth a closer look. One good source of information is our Motley Fool Income Investor newsletter service, which provides two superior income-producing selections every month in addition to other actionable advice on how to increase yields in other areas of your portfolio. It also regularly features other carefully screened selections, which, like the service, are producing market-beating returns with lower volatility than the benchmarks are experiencing.

In the end, you want to own investments that will make you money. But just as important as maximizing returns is finding a strategy that will let you sleep at night. That's part of the appeal of dividend stocks -- and why they deserve a place in your portfolio.

For more on investing for income, read about:

Fool contributor Dan Caplinger loves seeing dividends come into his brokerage account. He doesn't own shares of the companies mentioned in this article. Masco and Genuine Parts are Motley Fool Income Investor selections. 3M and Diebold are Motley Fool Inside Value recommendations. Try any of our Foolish newsletter services free for 30 days. The Fool's disclosure policy always pays dividends.


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