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."
These S&P 1500 companies have paid and increased their dividend for at least 25 years. Because the S&P 1500 comprises small-, medium-, and large-cap stocks, you can get dividends from fast-growing mighty mites and king-sized major leaguers alike.
Let's examine the top dividend aristocrats by yield in the Utilities industry. For context, I've also included their five-year annualized dividend growth rate.
|
Company |
Trailing Yield |
5-Year Dividend Growth Rate |
|---|---|---|
|
1. Integrys Energy Group |
5.1% | 4.1% |
|
2. Consolidated Edison |
4.8% | 0.9% |
|
3. Questar |
3.3% | 3.4% |
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 finding companies capable of paying rising dividends for a quarter-century or more.
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