Just because a stock has been paying a dividend for decades, it doesn't mean it will continue to do so in the future. We live in uncertain times, and it's important to remember that past performance is no guarantee of future results.

That is why dividend investors often focus on the dividend payout ratio, which measures the size of a dividend payment to the company's net income.

Companies with low dividend payout ratios choose to retain most of their income, instead of paying it out as dividends. This income can then be reinvested into projects that will hopefully generate future growth, which will help the company increase future dividend payments.

The higher the dividend payout ratio, the less income is reinvested back into the company -- a trend that may negatively impact future profitability.

Four our list, we chose to only focus on companies with relatively low dividend payout ratios (below 35%).

In addition, all of these companies have seen their payout ratios decline over the last three years -- an encouraging trend to income investors, especially when you consider that all of these stocks are expected to boost their dividend payments over the next year.

To further refine the quality of the list, we went back in time, and identified the dividend stocks that outperformed the S&P 500 during the most recent downturn (between Oct. 1, 2007-Feb. 1, 2009).

Of course, past performance is no guarantee of future results. But when you consider the dividend growth of the companies below, and their track record during market downturns, this list might offer a good starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)

List sorted by dividend yield.

1. Republic Bancorp (Nasdaq: RBCAA): Dividend yield at 3.1%. Trailing-12-month dividend payout ratio at 12.94%, much lower than the previous period's payout ratio of 20.54%. Current year dividend per share projected at $0.59 vs. last year's dividend per share at $0.56. The company had a price return of 11.32% between Oct. 1, 2007-Feb. 1, 2009, beating the S&P 500 index by 57.93%.

2. First Commonwealth Financial (NYSE: FCF): Dividend yield at 2.2%. Trailing-12-month dividend payout ratio at 14.25%, much lower than the previous period's payout ratio of 174.79%. Current year dividend per share projected at $0.12 vs. last year's dividend per share at $0.06. The company had a price return of -15.95% between Oct. 1, 2007-Feb. 1, 2009, beating the S&P 500 index by 30.66%.

3. Commerce Bancshares (Nasdaq: CBSH): Dividend yield at 2.2%. Trailing-12-month dividend payout ratio at 33.25%, much lower than the previous period's payout ratio of 39.45%. Current year dividend per share projected at $0.94 vs. last year's dividend per share at $0.89. The company had a price return of -25.19% between Oct. 1, 2007-Feb. 1, 2009, beating the S&P 500 index by 21.42%.

4. Hormel Foods (NYSE: HRL): Dividend yield at 1.8%. Trailing-12-month dividend payout ratio at 26.66%, much lower than the previous period's payout ratio of 30.15%. Current year dividend per share projected at $0.63 vs. last year's dividend per share at $0.42. The company had a price return of -16.88% between Oct. 1, 2007-Feb. 1, 2009, beating the S&P 500 index by 29.73%.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Eben Esterhuizen does not own any of the shares mentioned above.

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