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 dividend stocks 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 dividend aristocrats by yield in the Pharmaceuticals, Biotechnology, and Life Sciences industry. For context, I've also included their five-year annualized dividend growth rate.
5-Year Dividend Growth Rate
Johnson & Johnson
Source: Capital IQ, a division of Standard & Poor's.
In its annual reconstitution of the Dividend Aristocrats index recently, S&P eliminated Eli Lilly
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. S&P just announced its dividend aristocrats for 2011, and you can see the top yielders for yourself.
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These are a handful of the thousands of public companies that can help you secure a third income for life. If you'd like to see which others make the cut, try Income Investor free for the next 30 days.
Jim Royal, Ph.D., owns none of the companies mentioned. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson, which is a Motley Fool Income Investor selection and a Motley Fool holding. Motley Fool Alpha owns shares of Abbott Laboratories and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
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