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.
|
Company |
5-Year Average Annual Dividend Growth Rate |
Yield |
|---|---|---|
| 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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