Meet the Dividend Achievers

If you're looking for dividend-paying stocks, you need to know the Dividend Achievers.

Created by Mergent and now overseen by Indxis, several indexes track companies that qualify as "Dividend Achievers" -- an elite group of roughly 300 businesses that have increased their dividends annually over the past decade, and that meet certain liquidity requirements.

These achievers are worth following because dividends can really pack a punch for your portfolio. According to an Ibbotson study, reinvested dividends made up 40% of total stock returns from 1926 to 2006.  

Dividend aficionados like me now have an easy way to buy into the Dividend Achievers index, thanks to exchange-traded funds (ETFs) such as the PowerShares Dividend Achievers ETF (PFM), which recently sported a 3.1% dividend yield.

But that's not exciting enough for me. To earn a spot on the list, a company must simply increase its dividend 10 years in a row. That's a decent enough accomplishment, since troubled companies often reduce or eliminate their dividends instead, but it's not all that impressive. After all, a company could have grudgingly increased its payout by a penny or two per year, and still made the list.

Stronger measures
The folks at Dividend Achievers headquarters may have been thinking along the same lines, because they now offer several subsets of the big list.

The Dividend Achievers 50 Index, for example, tracks the 50 highest-yielding stocks on the list -- a more tantalizing option for me, with its current yield of roughly 5.8%. Healthy companies with high dividend yields tend to have drawn the market's scorn for some reason -- if the dividend stays constant, and the stock price falls, the dividend yield rises.

The High Growth Rate Dividend Achievers index, with a recent yield of 3.6%, presents another intriguing option. This index filters the list to highlight the 100 stocks with the fastest-growing dividends, giving you an easy way to invest in some of the market's most active and aggressive dividend payers.

Some examples include:

Company

% of Index

McDonald's (NYSE: MCD  )

4.8%

Home Depot (NYSE: HD  )

4.8%

Johnson & Johnson (NYSE: JNJ  )

4.3%

United Technologies (NYSE: UTX  )

4.4%

Wal-Mart (NYSE: WMT  )

4.2%

Medtronic (NYSE: MDT  )

4%

Pfizer (NYSE: PFE  )

4.8%

Source: PowerShares, as of Jan. 21.

Caveat emptor, investors
Before you snap up shares of the ETFs that track these indexes, remember thatthey're not perfect. Their limited quantitative scope means they'll invariably include some companies that might not be high on your list of candidates.

Despite its various attractions, Pfizer is not universally loved. In our CAPS stock rating system, 8% of our All-Star participants (more than 115 of them) are bearish on the company, pointing to expiring patent protection on various blockbuster drugs and a less-than-inspiring pipeline of potential replacements. Still, since these ETFs cover indexes of many companies, one bad performer won't torpedo your entire portfolio. (That's the beauty of diversification.)

Indexes are a good place to start, but a little research can help you strengthen your investments' focus. To maximize your dividend power, seek attractive companies with sizable, regularly growing dividends.

If you'd like some help with that, take advantage of a free trial of our Motley Fool Income Investor newsletter. There's no obligation to subscribe, and you'll be able to access all past issues and read about every recommendation in detail.

Dan Caplinger updated this article, originally written by Selena Maranjian and published Oct. 24, 2007. Dan doesn't own shares of the companies mentioned. Pfizer and Johnson & Johnson are Motley Fool Income Investor picks. Wal-Mart, Pfizer, and Home Depot are Motley Fool Inside Value picks. The Fool owns shares of Pfizer. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (24)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 22, 2009, at 1:14 PM, cirhos wrote:

    Why is DOW Chemical not included in high dividend paying stocks. Isn't paying around 10%

  • Report this Comment On January 22, 2009, at 1:19 PM, patches222 wrote:

    Why do you NOT List VECTREN -- VVC as a TOP dovidend paying stock. VVC has paid an imceased divididend for past 49 years . Now runs about 5%!!

  • Report this Comment On January 22, 2009, at 4:42 PM, doggiesstocks wrote:

    MCD yield is NOT 4.8%, it's 3.41%

  • Report this Comment On January 22, 2009, at 11:52 PM, valari25 wrote:

    PFE is 7.8%, not 4.8%

    JNJ is 3.3%, not 4.3%

    UTX is 3.1%, not 4.4%

    WMT is 1.9%, not 4.2%

    MDT is 2.3%, not 4%

    HD is 4%, not 4.8%

    You didn't get a single yield correct in this article. Normally, I wouldn't say something like this but they really ought to fire you. Did you steal the article and just pop in some companies without changing the yields?

  • Report this Comment On January 23, 2009, at 11:57 AM, mtcowboy1 wrote:

    In your current email you list SBS as having a 7.2% yield but when I look on Yahoo Finance SBS doesn't show any yield. Is there something I am missing?

  • Report this Comment On January 23, 2009, at 3:13 PM, ezwind wrote:

    FYI: The table above does not purport to show the dividend yield of the stocks listed. It shows what percentage of the High Growth Rate Dividend Achievers index each stock represents. So who deserves to be fired?

  • Report this Comment On January 23, 2009, at 9:57 PM, valari25 wrote:

    It was edited after I posted my comment and sent a feedback to TMF. It was labeled as dividend yield, not % of index.

    The problem now is it doesn't matter if it actually is % of index (we damn sure know it isn't yield), who is going to trust the article? This is just one in a long list of articles that are factually wrong. It is very damaging to the trust readers put into this site and its authors.

  • Report this Comment On October 21, 2009, at 5:33 PM, blkbrd101 wrote:

    I'd like to see answers from the FOOL on all the above comments. If we can't trust the content of what you write you are charlatans. Give us the straight poop. If you mean Dividend Yield say so! If you mean % of index say so. Stop hiding behind semantics!

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