Wednesday, June 29, 2011

16 Core Dividend Stocks for your income portfolio

There are approximately 300 stocks in the world, which have managed to increase dividends for at least ten years in a row. As a dividend growth investor I have analyzed in some detail almost all of these stocks, even though most of them will probably never meet my entry criteria. One reason behind that is valuation. Another, more important reason is that few of these companies have sustainable competitive advantages. As a result, in my articles describing dividend growth investing I tend to focus on a narrow list of quality candidates.


The reason behind this is because there are only a handful of quality dividend growth stocks which meet the above characteristics. These companies have a proven track record of dividend increases, fueled by earnings growth which was a direct result of having a strong brand name and a product or service which they can charge premium prices for.

Right now, I find these quality companies to be the core of my dividend portfolio. If I were starting in dividend investing today, I would certainly be accumulating these stocks first, before looking for other opportunities.

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. The company has raised dividends for 49 years in a row and its ten year annual dividend growth rate is 10%. Yield 2.80% (analysis)

PepsiCo, Inc. (PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company has raised dividends for 39 years in a row and its ten year annual dividend growth rate is 13%. Yield 3% (analysis)

The Clorox Company (CLX) engages in the production, marketing, and sales of consumer products in the United States and internationally. The company has raised dividends for 34 years in a row and its ten year annual dividend growth rate is 9.90% . Yield 3.60% (analysis)

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised dividends for 48 years in a row and its ten year annual dividend growth rate is 12.40%. Yield 2.70% (analysis)

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company has raised dividends for 49 years in a row and its ten year annual dividend growth rate is 13%. Yield 3.40% (analysis)

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company has raised dividends for 55 years in a row and its ten year annual dividend growth rate is 10.90%. Yield 3.30% (analysis)

Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company has raised dividends for 24 years in a row and its ten year annual dividend growth rate is 8.10%. Yield 3.10% (analysis)

Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. The company has raised dividends for 34 years in a row and its ten year annual dividend growth rate is 16.90%. Yield 2.50% (analysis)

Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance. The company has raised dividends for 28 years in a row and its ten year annual dividend growth rate is 21.30%. Yield 2.60% (analysis)

Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company has raised dividends for 29 years in a row and its ten year annual dividend growth rate is 10%. Yield 2.50% (analysis)

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company has raised dividends for 37 years in a row and its ten year annual dividend growth rate is 17.80% . Yield 2.70% (analysis)

Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. The company has raised dividends for 39 years in a row and its ten year annual dividend growth rate is 8.80%. Yield 3.70% (analysis)

Kinder Morgan Energy Partners, L.P. (KMP) owns and manages energy transportation and storage assets. The company has raised distributions for 15 years in a row and its ten year annual distribution growth rate is 10.90%. Yield 6.40% (analysis)

Philip Morris International Inc. (PM), through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Yield 3.80% (analysis)

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a worldwide foodservice retailer. The company has raised dividends for 34 years in a row and its ten year annual dividend growth rate is 26.50% . Yield 2.90% (analysis)

The Chubb Corporation (CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. The company has raised dividends for 46 years in a row and its ten year annual dividend growth rate is 8.30%. Yield 2.50% (analysis)

At the end of the day I understand that purchasing a new dividend achiever with excellent growth prospects could deliver outstanding total returns over time. This is a hit and miss approach however, as high growth could simply be an aberration of short term economic trends. The beauty of the stocks above however is that they deliver consistent results. They deliver results like clockwork. These companies are leaders in their industries, which makes their success difficult to emulate. Their products/services are relatively immune from recessions, although they are not bulletproof. The rising stream of dividends provide investors with an edge that would generate strong returns over time.

Full Disclosure: Long all stocks listed above

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This article was included in Carnival of Personal Finance #316

8 comments:

  1. Protect your downside and enjoy slow predictable returns! Perfect!

    ReplyDelete
  2. You say there are 300 of these companies and their stocks in the world that have raised dividends for at least 10 years in a row. And then your list shows only US stocks that have done so. If you're truly "diversified" and want protection from a value losing US dollar, how come we don't see some of those other non-US issues listed here for precisely that reason?? Your list in "normal times" would be impressive. But in the world of the sick US dollar (and an even sicker US govt that can't live within it's means & runs HUGE deficits), I think you're making a BIG mistake not going to some of those non-US issues that do indeed pay such dividends that are NOT in US dollars. There's no way you can preach diversity & safety and then have a list of stocks that pays their dividends only in US dollars, I don't care how many choice companies you list....

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  3. Just out of curiousity, what do you think of Novartis (NVS) as a quality Dividend growth company? I've been buying shares for a while now and have an average cost of about 57$ per share.

    ReplyDelete
  4. Chux91,

    I hear you on the benefits of international diversification. I have written on the subject of international dividend stocks on this blog:

    http://www.dividendgrowthinvestor.com/2009/06/best-international-dividend-stocks.html

    http://www.dividendgrowthinvestor.com/2008/08/international-dividend-achievers-for.html

    However I have found that the stocks I discussed in this article generate at least 40%-50% of their revenues from outside the US. These are true global corporations. They are based in the US, and traded on US stock exchanges, but they have global operations.

    If you are a dividend investor from the US, it might be cheaper in the long run to buy Us listed, US based multinationals, as opposed to Foreign listed stocks.

    Read this:

    http://www.dividendgrowthinvestor.com/2008/12/international-over-diversification.html

    Daniel,

    I have not looked at NVS. I would include it on my list for further analysis. Thanks

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  5. Is your dividend portfolio in a tax exempt retirement account or is it subject to taxes?

    I currently max out both my mine and my wife's Roth IRA. I also receive my employer's maximum matching in my 401k.

    I want to have an account that I can withdraw from (without penalty) before I am 59 1/2. I am very interested in developing a dividend growth portfolio (to get the passive income) that I can use before I am 59 1/2. However, I do not want to get killed on taxes (if that is possible).

    Do you or anyone else have any thoughts or recommendations on this subject? Or do you know of any recommended reading?

    This is a great site...please keep up the good work!

    ReplyDelete
  6. What about Exxon Mobil? I think oil stocks are always good for dividends. I always like to buy them on a dip. Though I guess BP proved how risky they can be. But even the safest companies have risk!

    ReplyDelete
  7. You neglected to include T in your list, plus I remember you commenting you had reduced your holdings in T. would you comment why.

    ReplyDelete
  8. I note that this list is from June, 2011. Is it still valid? Thanks

    ReplyDelete

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