The Dow Jones Industrials (DJINDICES:^DJI) has been setting new record highs on a regular basis for more than a year now, and investors love the capital appreciation that most blue-chip stocks have provided lately. But dividends can be even more important than rising share prices to many investors. When you look at the past 10 years, a few stocks stand out for the way that they have consistently grown their dividends. Let's look at why Intel (NASDAQ:INTC), McDonald's (NYSE:MCD), and Chevron (NYSE:CVX) top the list of Dow dividend stocks over the past decade.
If you said 10 years ago that Intel would be one of the strongest dividend stocks in the Dow, few investors would have believed you. Tech stocks were notorious holdouts in paying dividends to investors, instead spending the money on share buybacks and to reinvest in growing their businesses. But as tech stocks such as Intel matured they started producing huge amounts of excess cash flow, and recent years have seen many longtime dividend nonpayers finally bite the bullet and initiate payouts. Intel was far from the last tech company to embrace dividends, and the Dow component's payout has gone from just $0.02 per share on a quarterly basis in late 2003 to $0.225 per share quarterly now -- an 11-fold increase. With Intel having taken a break from dividend increases for a while, the chip giant appears to be looking at ways to reinvest its free cash flow toward growing in the mobile-device space, where it has lagged behind its peers.
McDonald's has been a bastion of dividend consistency, with a 38-year track record of annual payout increases. Over the past decade, McDonald's dividend has risen from a $0.40 per share annual payout to an $0.81 per share dividend every quarter, with the fast-food giant's accelerating dividend growth really having started the year before. Yet McDonald's hasn't let this rising dividend hold back its growth initiatives, with an aggressive move into emerging markets helping the company weather some of the storms that have plagued the U.S. fast-food industry. Even as McDonald's has faced slowing growth in some of its formerly hottest markets, the Dow component hasn't wavered in its commitment to pay income to shareholders, although some critics were disappointed by McDonald's decision to raise its payout by only about 5% last fall rather than the 10% rate it had adopted previously.
Chevron is also a Dividend Aristocrat, with a 26-year streak of rising annual payouts. The oil giant's quarterly dividends have risen by nearly three times since early 2004, with its most recent increase taking the payout to $1.08 per share on a quarterly basis. As oil prices have jumped over the past decade, Chevron has been able to afford afford both to reward shareholders for their patience during the long 1990s bear market in oil prices and to have enough money left to finance share buybacks and exploration costs. With a solid combination of strategies for managing capital, Chevron has solid dividend prospects for the long run.
A rising Dow is always good for investors, but dividends are also important. Keying in on the best dividend stocks in the Dow can make your odds of success in the market a whole lot better.
Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Chevron, Intel, and McDonald's. The Motley Fool owns shares of Intel. 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. The Motley Fool has a disclosure policy.