Dividend-paying companies are an oasis in the desert of underperforming stocks. They offer solid payouts today and the promise of capital gains tomorrow. According to a study by Ibbotson, reinvested dividends made up about 40% of total stock returns from 1926 to 2006. In fact, dividend investing is so appealing that superinvestor Warren Buffett has made it a significant component of his portfolio.
When searching for great dividend stocks, it makes a lot of sense to start with companies that have been playing the dividend game the longest. Standard & Poor's has culled the dividend winners from the also-rans in a list it calls the "dividend aristocrats."
Let's examine the top 25 fastest-growing yields among these dividend aristocrats. For context, I've also included their trailing yield.
5-Year Average Annual Dividend Growth Rate
|CenturyLink (NYSE: CTL )||63.9%||8.4%|
|Lowe's (NYSE: LOW )||29.7%||2.9%|
|McDonald's (NYSE: MCD )||28.9%||2.8%|
|Walgreen (NYSE: WAG )||21.9%||2.6%|
|Target (NYSE: TGT )||20.1%||2.5%|
|AFLAC (NYSE: AFL )||19.7%||3.2%|
|W.W. Grainger (NYSE: GWW )||17.7%||1.9%|
|Wal-Mart (NYSE: WMT )||15.6%||2.9%|
|Automatic Data Processing (Nasdaq: ADP )||14.9%||3%|
|Clorox (NYSE: CLX )||14.4%||3.5%|
|Becton, Dickinson (NYSE: BDX )||14.2%||2%|
|PepsiCo (NYSE: PEP )||12.6%||3.3%|
|VF Corp (NYSE: VFC )||12.2%||2.3%|
|Ecolab (NYSE: ECL )||11.9%||1.5%|
|Hormel Foods (NYSE: HRL )||11.5%||1.8%|
|Procter & Gamble (NYSE: PG )||11.4%||3.4%|
|Sigma-Aldrich (Nasdaq: SIAL )||11.2%||1.1%|
|Archer-Daniels-Midland (NYSE: ADM )||10.9%||2.3%|
|Family Dollar Stores (NYSE: FDO )||10.9%||1.5%|
|Leggett & Platt (NYSE: LEG )||10.7%||5.6%|
|Chubb (NYSE: CB )||10.3%||2.6%|
|Air Products & Chemicals (NYSE: APD )||10.1%||2.8%|
|Dover (NYSE: DOV )||10.1%||2.3%|
|Abbott Laboratories (NYSE: ABT )||10%||3.9%|
|Johnson & Johnson (NYSE: JNJ )||9.9%||3.6%|
Source: Capital IQ, a division of Standard & Poor's.
These aren't formal recommendations -- just ideas for your own further research. Still, they could give you a great start toward find companies capable of paying rising dividends for a quarter-century or more. You can find the list of highest yields here.
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