I entered into a stock picking competition at the end of 2010, where I had to select four stocks that would do great in 2011. Instead, I selected four great dividend growth stocks, which have excellent long-term prospects. The companies all have strong brands, a diversified mix of products sold globally, and a tendency to raise dividends regularly out of their rising earnings.
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. Johnson & Johnson is a member of the elite dividend aristocrats index, and has increased distributions for 49 years in a row. Yield: 3.40% (analysis)
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. Procter & Gamble is a member of the elite dividend aristocrats index, and has increased distributions for 55 years in a row. Yield: 3.30% (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. The company has consistently raised distributions since its spinoff from Altria (MO) in 2008. Yield: 3.80% (analysis)
PepsiCo, Inc. (PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company operates in four divisions: PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), PepsiCo Europe, and PepsiCo Asia, Middle East and Africa (AMEA). PepsiCo is a member of the elite dividend aristocrats index, and has increased distributions for 39 years in a row. Yield: 2.90% (analysis)
This portfolio has been able to deliver a 8.90% total return so far in 2011, compared to a 5.90% total year to date return for the S&P 500. This puts me in the top two of the competition so far this year:
Intelligent Speculator +9.35%
Money Smarts Blog -5.72%
Wild Investor -7.69%
I am a firm believer in diversification. As a result the companies listed above should not be the only investments that comprise a dividend growth portfolio. Even with solid companies it pays to diversify across sectors, countries and even asset types in order to avoid risk of ruin. As a result in my personal portfolio I hold approximately 40 individual securities.
Full disclosure: Long JNJ, PG, PM, PEP