Many investors lost money over the past couple of years, but the endowments at prestigious universities suffered even worse. Investment performance at Harvard and Yale "badly trailed" the results at the average college, as The Wall Street Journal so delicately put it. I'm shocked -- but not because of these endowments' lackluster returns.

With exotic strategies and illiquid investments, Princeton registered a 24% loss in 2009, while Cornell took a 26% hit, and Harvard suffered a 27% drop. Compare those losses to the 18% drop for the median large endowment. Worse yet, many such institutions fund their operating expenses with the capital from endowments like these. If they don't generate capital gains, they may be forced to cut budgets and slash salaries.

So what?
Rather than relying on capital gains to sustain our own budgets, we need to seek additional safety in the power of ever-increasing dividend streams. With such a strategy, you'll never have to float debt in order to avoid whittling down your principal. Princeton only wishes it could say the same.

The companies below provide a dividend yield at least as high as that of the S&P 500 (about 2%), and they've grown their dividends at more than 5% per year over the past half-decade:

Company

Trailing Dividend Yield

5-Year Average Annual Dividend Growth Rate

FCF Payout Ratio

Sustainable Dividend Growth

Vodafone (Nasdaq: VOD)

5.2%

12.3%

50.3%

5.1%

Tiffany (NYSE: TIF)

2.2%

24.9%

28.5%

11.8%

Buckle (NYSE: BKE)

2.9%

28.7%

43.6%

23.2%

Source: Capital IQ, a division of Standard & Poor's. Sustainable dividend growth assumes constant payout ratio.

Vodafone offers a high dividend yield and has shown fairly high growth rates over the past five years, but its sustainable growth rate suggests that it may not be able to continue to grow its dividend at comparable rates. Still, its payout ratio is not excessive.

Tiffany and Buckle have also increased their dividends substantially and pay out moderate portions of their free cash flow. In contrast, though, their sustainable dividend growth is much higher, thanks in part to the fact that their current yields are relatively low compared with Vodafone's.

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., does not own shares of any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.