4 Stocks That Are Leading the Rebound in Dividends

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Post-recession earnings growth is lifting spirits in executive offices and boardrooms -- and it's going to weigh shareholders' pockets down a little bit more. According to analysis by Bloomberg, not one stock in the S&P 500 is expected to lower its dividend this quarter -- a first since 2004. Even former growth darling Starbucks (Nasdaq: SBUX  ) has found religion, initiating a $0.10 quarterly dividend (albeit with a modest yield of 1.5%). Aggregate S&P 500 dividends have increased by $8.4 billion year-to-date, whereas 2008 and 2009 produced a cumulative decline of $58.8 billion. So how do investors participate in this trend?

Four dividend workhorses
Four stocks made an outsize contribution to the increase in total dividend dollars: With their April dividend raises, IBM (NYSE: IBM  ) , Johnson & Johnson (NYSE: JNJ  ) , Procter & Gamble (NYSE: PG  ) , and ExxonMobil (NYSE: XOM  ) added $1.9 billion to S&P 500 dividends -- they currently account for better than one-tenth of the total for the index:


Dividend Increase

Dividend Yield




Johnson & Johnson (NYSE: JNJ  )



Procter & Gamble (NYSE: PG  )



ExxonMobil (NYSE: XOM  )



Source: Standard & Poor's.

With the exception of ExxonMobil, the percentage increase in the dividend amount is well ahead of what investors should expect in terms of annualized price appreciation on the S&P 500 over the next five to seven years. The dividends on these stocks are about as secure as they come, and the stocks' valuations on 2011 expected earnings-per-share all look reasonable -- investors could do a lot worse than to own these dividend stalwarts.

Amounts are higher, but the dividend yield remains low
Despite the positive news, not all dividend-related data is encouraging: At 1.81%, the dividend yield on the S&P 500 is barely above the five-year low it achieved on April 28th (1.75%). That's consistent with an observation I have been repeating for some time now: The extraordinary stock market rally that began in March 2009 has lifted stocks into "overvalued" territory. All the more reason to stick with well-priced, defensive names and sectors: The top three sectors by dividend yield remain telecommunication services (6% on April 28), utilities (4.4%) and consumer staples (3%).

Interested in more high quality dividend stock ideas? Tim Hanson identifies six stocks that the Motley Fool's top dividend-focused analysts are watching.

Fool contributor Alex Dumortier has no beneficial interest in any of the stocks mentioned in this article. Starbucks is a Motley Fool Stock Advisor recommendation. Johnson & Johnson and Procter & Gamble are Motley Fool Income Investor picks. Motley Fool Options has recommended a buy calls position on Johnson & Johnson. The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.

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10/21/2016 4:01 PM
IBM $149.63 Down -1.89 -1.25%
IBM CAPS Rating: ****
JNJ $113.44 Down -1.43 -1.24%
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PG $84.33 Down -0.60 -0.71%
Procter and Gamble CAPS Rating: ****
SBUX $53.63 Up +0.04 +0.07%
Starbucks CAPS Rating: ****
XOM $86.62 Down -0.59 -0.68%
ExxonMobil CAPS Rating: ****