Rely on These Stocks for Higher Dividends

For millions of investors, dividend stocks have become the gold standard on which they base their entire portfolios. Even better are stocks that increase their dividend payments every year.

But as the end of the year approaches, some stocks that have long streaks of annual dividend increases on the line are getting into crunch time. Although nothing in investing is certain, you can usually count on these companies to do everything they possibly can to keep their streaks going.

Staying aristocratic
The pinnacle of achievements for dividend stocks is inclusion in what's known as the Dividend Aristocrats. Every year, Standard & Poor's goes through the thousands of stocks that trade on U.S. exchanges looking for those that have increased their dividends every year without interruption for at least 25 years. The resulting list is a select group of top stocks that usually numbers between 40 and 50.

Especially as investors have increasingly focused on dividend stocks as a primary source of income, Dividend Aristocrat status carries a lot of weight. By putting together a 25-year track record of ever-climbing payouts, companies prove that they have the discipline and growth potential to support dividend increases even during the low points of the many business cycles a company sees in a quarter-century. And with the bear markets of 2000-02 and 2008-09 looming large in investors' memories, getting through those periods unscathed is a true sign of quality.

So no company that worked so long to make the Dividend Aristocrat list wants to lose that status without a fight. So the obvious question for dividend-seeking investors is this: Which stocks still have to raise their payouts in order to extend their streaks another year?

Down to the wire
Many Dividend Aristocrats make sure to raise dividends early each year in order to get it out of the way and leave no doubt about the continuation of their streaks. But you'll find plenty of stocks that tend to wait until later in the year to make their increases.

In order to try to find some likely candidates for dividend increases before they announce higher payouts, I took a look at Dividend Aristocrats that haven't yet made dividend hikes in 2011. Here are the stocks I found:

Stock

Current Dividend Yield

Streak

Aflac (NYSE: AFL  ) 3.5% 28 years
Automatic Data Processing (Nasdaq: ADP  ) 3.0% 36 years
Becton Dickinson (NYSE: BDX  ) 2.1% 38 years
Brown-Forman 1.9% 27 years
Emerson Electric (NYSE: EMR  ) 3.1% 54 years
McCormick (NYSE: MKC  ) 2.4% 25 years
McDonald's (NYSE: MCD  ) 2.8% 34 years
VF Corp. (NYSE: VFC  ) 2.1% 38 years

Sources: Dripinvesting.org; Yahoo! Finance.

At this point, there's no reason for concern that any of these companies won't be able to increase their dividends on schedule. None of these companies has incredibly high dividend yields, and payout ratios for all of them are quite manageable, suggesting that the companies have earned enough to support a higher payout.

Of course, some of the companies have gone through events that have taxed their profits. Aflac struggled from the Japanese earthquake, while VF recently spent a lot of money buying out Timberland.

But the important thing to remember is that all it takes is a token increase to extend a streak. While Becton Dickinson and McDonald's raised their dividends by double-digit percentages last year, Emerson increased its payout by a single penny -- and it still has one of the highest yields on the late-raiser list.

Get your fair share
Unless these stocks end up making truly huge dividend increases, you shouldn't expect any great surprise when they follow through and make their announcements later this year. In fact, it would be a big shock if any of these companies didn't give their shareholders the rewards they look forward to every year. But as prospects for the stock market get cloudier, the confidence of owning dividend stocks with long track records of strong performance is more valuable than ever.

One thing these stocks don't have, though, is an exceptionally high yield. If you want something with a bit more cash behind it, check out these 13 high-yielding dividend payers in this free Motley Fool special report.

Fool contributor Dan Caplinger knows there's no such thing as a sure thing. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Aflac. Motley Fool newsletter services have recommended buying shares of McCormick, Becton, ADP, Aflac, McDonald's, and Emerson Electric. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can depend on the Fool's disclosure policy.


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