By
Jim Royal, Ph.D.
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More Articles
October 20, 2010
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Dividend-paying companies are the oasis in the desert of underperforming stocks. They offer solid payouts today, and not simply the promise of gains tomorrow (though they do offer that, too!). In fact, dividend investing is such an attractive alternative, that super-investor Warren Buffett has made it a significant component of his portfolio.
A great way to find outperforming dividend-paying companies is to examine the stocks in the "Dividend Achievers Select Index," an elite group of companies that have raised their dividends annually over at least the past 10 years. The list was created by Mergent and is now overseen by Indxis, which screens eligible stocks for liquidity and investability. The index features about 140 stocks for 2010.
In case you need further convincing that dividend investing is profitable: According to a study by Ibbotson, reinvested dividends made up about 40% of total stock returns from 1926 to 2006. And as I've argued elsewhere, dividends are the most secure way to build a cash-flow powerhouse.
So let's take a look at the top dividend achievers by yield in the diversified financials industry. For context, I've also included their five-year annualized dividend growth rate.
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Company
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Trailing Yield
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5-Year Dividend
Growth Rate
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| 1. Federated Investors (NYSE: FII ) |
4%
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13.8%
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| 2. Eaton Vance (NYSE: EV ) |
2.1%
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8.5%
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| 3. T. Rowe Price (Nasdaq: TROW ) |
2%
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18.8%
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| 4. SEI Investments (Nasdaq: SEIC ) |
0.9%
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12.6%
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| 5. Franklin Resources (NYSE: BEN ) |
0.8%
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17.7%
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Source: Indxis.com and Capital IQ.
With cash and Treasuries yielding mere pennies on the dollar, your best bet to beat inflation is in high-yielding stocks. Check out other high-growth Dividend Achievers here, here, and here.
Interested in reading more about T. Rowe Price Group? Add it to My Watchlist, which will find all of our Foolish analysis on this stock.
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