An Unprecedented $16.6 Billion Dividend Opportunity Revealed

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Earlier this month, The Associated Press reported that large companies are increasing their dividends by amounts previously unseen in history. Simultaneously, an analyst unveiled that S&P 500 companies are holding a record $940 billion in cash.

I'm currently positioning my portfolio to profit from this unprecedented event, and in the next four minutes, I will show you how to do the same. Get ready to do something extraordinary.

What's at stake?
$16.6 billion! That's the amount S&P analyst Howard Silverblatt is reporting S&P 500 companies are increasing their dividends. That's spread across 117 different companies.  Today, I'm revealing my five favorites of the group and also sharing with you how to get free access to 13 more outstanding dividend payers identified by The Motley Fool's expert analysts.

The dividend bonanza of 2011
I won't waste your valuable time with a long-winded explanation of why dividend growth is important. Just know that by buying stocks with a consistent history of increasing dividends, you position yourself for increasingly massive payouts in the future. As a quick example, if you buy a stock that pays a dividend of 2.5%, and it increases its payout by a compounded 20% per year, you'd have an whopping 15.5% yield on your original investment in a mere 10 years.

Imagine getting a 20% raise each and every year. That's a life-changing payout that I'm planning to take part in; by the end of this article you should do the same.

The absolute best dividend growers
In order to find the best fast-growing dividend payers, I carefully sorted through the companies announcing sizable dividend hikes and handpicked five that best met these qualifications:

  1. I believe in the long-term viability of the business.
  2. Announced a substantial dividend increase this year.
  3. Long history of sustainably increasing dividends.

Deep consumer value
The first two companies turbo-charging their dividends are discounters TJX Cos. (NYSE: TJX  ) , more commonly known by its major brands T.J. Maxx and Marshalls, and Ross Stores (Nasdaq: ROST  ) . Discount retail has been an obvious choice throughout the recession, and I strongly believe the industry will continue to thrive.

With dividend boosts of 27% and 38%, respectively, these companies are indicating that they're more than happy for shareholders to own their shares through the 2011 dividend bonanza.  And none of this is new for either of these companies. They've both increased their dividends year after year since the mid-90s. Talk about consistency you and I can rely on!

The venerable retail legend
Next is a retailer we've all known about for years. The stock has underperformed the S&P over the past 10 years but has continued to boost its dividend at a compounded 17% per year.  And this year it's accelerating that increase -- to shareholders' benefit. I'm talking about Wal-Mart (NYSE: WMT  ) , which has indicated it's boosting the dividend by a whopping 21%.

I'm willing to give Wal-Mart time to get its local and international act together. All the while, I'll be profiting from its ever-higher dividend.

A unique dividend play
Next is Hasbro (Nasdaq: HAS  ) , an oddity in a dividend portfolio, but one I personally own for its outstanding intellectual property and history of dividend increases. Hasbro is not disappointing me this year. It's pumping the dividend up by 20% -- something I'm excited to see as I watch it turn its library of content into movies and new media games. I think of it like a pre-acquisition Marvel that has given shareholders a 17% annual raise (via compounded dividend increases) over the past 10 years.

Tech and dividends -- a winning combination
My last pick of the five is a mobile device play recommended to me by Motley Fool's Rising Tech Star, Eric Bleeker. Tech companies are well-known cash hoarders, though networking giant Cisco (Nasdaq: CSCO  ) has recently instituted a $0.06 (1.4%) dividend to begin paying out some of its $40 billion in cash.

Instead of waiting for other tech giants to begin returning cash to shareholders, I'm tapping Qualcomm (Nasdaq: QCOM  ) for its leadership in mobile processors and unmatched patent portfolio in the space. It's been paying a dividend since 2003 and has steadily boosted it along the way. While its current-year increase is the smallest of the companies I've mentioned, I'm most excited about the future growth prospects of the underlying business.

Here's a quick summary of the companies I've mentioned, but feel free to skip to below the table.


Current Yield

5-Year Dividend CAGR

Percentage Dividend Increase Announced

TJX 1.5% 20% 27%
Ross Stores 1.2% 26% 38%
Wal-Mart 2.8% 15% 21%
Hasbro 2.6% 22% 20%
Qualcomm 1.4% 17% 13%

Source: Capital IQ, a division of Standard & Poor's.

Some of those current yields may not impress you, but I urge you to compare the high-velocity nature of their dividends next to others in the market. For 13 fantastic comparison companies, keep reading below.

Don't delay! Stake your claim -- here's how
With almost $17 billion in new dividends coming onto the market, now is the perfect time to claim your share of the combined $940 billion in cash S&P 500 companies are sitting on. By looking to the companies that are aggressively hiking their dividends and have a long history of doing so, you set yourself up for success now and over the next few decades.  

Start reaping the benefits today. Consider the five tickers above along with the 13 names from a highly regarded free report from Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," including one named by our senior retail analyst as "the one dividend stock for the rest of your life." Hundreds of thousands of your fellow investors have requested access to this report, and today I invite you to download it at no cost to you. To get instant access to the names of these 13 high yielders, simply click here -- it's 100% free.

Jeremy Phillips owns shares in Hasbro and Wal-Mart.

Wal-Mart is a choice of Motley Fool Inside Value, Global Gains, and Income Investor. Motley Fool Options has recommended a diagonal call position on Wal-Mart. Hasbro is a Motley Fool Stock Advisor and Income Investor pick. The Fool has created a bull call spread position on Cisco Systems and owns shares of Wal-Mart and Qualcomm. Motley Fool Alpha LLC owns shares of Cisco Systems. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (15) | Recommend This Article (102)

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 April 14, 2011, at 6:09 PM, haywool wrote:

    Hey !

    Don't forget DOW ... DOW CHEMICAL increased its July dividend by a whopping 67% !!

    Rich (haywool)

  • Report this Comment On April 14, 2011, at 7:19 PM, OPTIONNUT wrote:


    Check you CSCO numbers....40 Billion cash give away??? How do you figure, that would be about a

    40 plus percent dividend.


  • Report this Comment On April 14, 2011, at 8:10 PM, Wade32ru wrote:

    OPTIONNUT - the $40 billion in cash refers to how much cash it has on its balance sheet and the author means to say that CSCO can afford to distribute that to owners over time. It's alot of cash that isn't providing owners any value right now....

  • Report this Comment On April 14, 2011, at 10:26 PM, goalie37 wrote:

    Great article. The tricky part is getting 20% growth over a long time. The only situation where dividend growth can outpace earnings growth for a period of years is when the payout ratio is low. Once that hits 50% or so, EPS growth is about all you will get.

  • Report this Comment On April 15, 2011, at 12:57 AM, PeyDaFool wrote:


    With "$940 billion in cash S&P 500 companies are sitting on," why not just buy SPY? Surely it will have a better yield than most of the recommendations you made above after all the increases.

    Why choose companies that may underperform the index when you can own the index and reap the benefits of this awesome increase in dividend distributions?

    It seems like you're playing a risky game by trying to guess which companies will outperform when you can buy the ETF and mitigate all your risk.

    Your thoughts?

  • Report this Comment On April 15, 2011, at 7:54 AM, dontwin wrote:

    Why recommend stocks with dividends of 1 to 2% when you can get 6 to 7% from Sea Drill and Verizon? It takes a lot of dividend increases to equal 6%. If you are going to mention dividends increases, you should have mentioned Sea Drill which gave an extra $.20 dividend last quarter based upon future earnings.

  • Report this Comment On April 15, 2011, at 10:46 AM, pryan37bb wrote:

    PeyDaFool said:

    "With '$940 billion in cash S&P 500 companies are sitting on,' why not just buy SPY? Surely it will have a better yield than most of the recommendations you made above after all the increases."

    Not necessarily. While the companies Jeremy selected can potentially boost their dividends significantly, the same can't be said for the rest of the companies in the index. So if the companies in the article boost their divs 20% but other companies in the S&P maintain, or even reduce or cut, their dividend, S&P's dividend will not fare as well, not to mention the many stocks in the S&P that don't pay dividends. The argument could, however, be made for an ETF that holds only S&P dividend payers. I'll bet WisdomTree has something like that, I don't know offhand.

    But I agree with the previous poster who'd argued in favor of finding 6%+ dividends, because in order to reap the benefits of some of these dividend-growth stocks, you'd have to hold it for a very long time, and if the stock takes a turn for the worse and you want (or need) to bail out, you might not ever see that theoretical 15% dividend posited by the author, or even the 7% you can get elsewhere.

  • Report this Comment On April 15, 2011, at 12:00 PM, Borbality wrote:

    my biggest holding is VIG dividend appreciation ETF, and I bought some QCOM earlier this year hoping to hold a long time.

    Hoping GOOG someday adds a dividend too.

  • Report this Comment On April 15, 2011, at 12:28 PM, RNF62 wrote:

    Why can't I get the free report?? I'm sent back to the Foll home page... and don't receive anything in my inbox.

  • Report this Comment On April 15, 2011, at 3:24 PM, pastreet wrote:

    YES!!! Dividend Party!

    These companies have been hoarding cash for so long, its about time to send some money to the owners!


  • Report this Comment On April 15, 2011, at 10:02 PM, PeyDaFool wrote:


    "So if the companies in the article boost their divs 20% but other companies in the S&P maintain, or even reduce or cut, their dividend, S&P's dividend will not fare as well."

    Please let me know where I can find a crystal ball like yours which tells you which companies will increase their dividends consistently 20% each year while letting you know other companies in SPY will significantly reduce or cut their dividends.

    Maybe it's a time machine you're using to go into the future to determine this? Either way, I'm very interested in learning how you're so informed about what will happen in the future.

  • Report this Comment On April 20, 2011, at 7:01 PM, Nahzuul wrote:

    @PeyDaFool, Doesn't it make sense that if you are implementing a dividend investment strategy, that you should buy stocks that pay dividends? Many stocks in the SPY don't pay dividends. Sure, it might be a better investment strategy than buying individual stocks. It depends on which stocks you choose, doesn't it? That's an age old question and well discussed elsewhere, but is it a dividend investment strategy?

    Good investing is all about predicting the future. No crystal ball or even sarcasm is required. It's all about analysis of the past, the present and future prospects of a companies business. You can only attempt to predict the most likely outcome.

  • Report this Comment On April 21, 2011, at 12:57 AM, PeyDaFool wrote:


    [begin sarcasm]

    Very true. And after viewing your CAPS page, I notice you have a score of negative 54.69 and an accuracy of 43.48%.

    Great job on "good investing and predicting the future."

    [end sarcasm]

  • Report this Comment On April 22, 2011, at 1:10 PM, Atr7865 wrote:

    Why do not you guys investigate the big dividend payers next door in Canada,with a boosting economy and Profits,there are some out-standing dividend payers,

    A. Razvi

  • Report this Comment On May 09, 2011, at 10:53 PM, thuringensis wrote:

    Best way to play the S&P dividend may be the S&P dividend ETF, which owns the dividend paying stock in the S&P. This gives some diversification, low fees, and a 3% yield. Ticker is SDY.

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