Wednesday, August 3, 2011

Five Free Dividend Stocks

The last decade has been touted as the lost decade for stock investors. The main reason why stock prices have gone nowhere since 2000, is mostly because stocks were overvalued. The shareholders of the following dividend champions however. who purchased them at the end of 1999, were able to get more in dividends than the amount they paid for the stock. In essence, they received their original investment back in the form of dividends, while still retaining ownership of the shares and the future dividend income stream that comes along with it.

In order to come up with this list, I looked for dividend champions, which paid out more in dividends between 2000 and 2010, than the price of their stock on December 31, 1999.

Altria Group, Inc. (MO), through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. This dividend champion has raised distributions for 42 years in a row. The stock closed at $23 at the end of 1999. Altria shareholders received 0.69 shares of Kraft Foods (KFT) for each share of Altria they owned in 2007. In addition, Altria shareholders received a share of Phillip Morris International (PM) in 2008 for each share of Altria shareholders held. Between 2000 and 2010, the 1999 investment in this tobacco stock would have generated a total of $35.18 in dividends from Altria (MO), Phillip Morris International (PM) and Kraft (KFT). Check my analysis of Altria. Yield: 5.70%

HCP, Inc. (HCP) is a Real Estate Investment Trust which invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing. This dividend champion has raised distributions for 26 years in a row. The stock closed at $11.93 at the end of 1999. Between 2000 and 2010, the 1999 investment in this real estate investment trust would have generated a total of $18.66 in dividends. Check my analysis of the stock. Yield: 5.10%

Federal Realty Investment Trust (FRT) operates as a real estate investment trust, which engages in the ownership, management, development, and redevelopment of retail and mixed-use properties. This dividend champion has raised distributions for 43 years in a row. The stock closed at $18.81 at the end of 1999. Between 2000 and 2010, the 1999 investment in this real estate investment trust would have generated a total of $23.99 in dividends. Yield: 3%

Washington Real Estate Investment Trust (WRE) is an equity real estate investment trust which focuses on office, medical office, industrial/flex space, retail, and multifamily real estate investments in the greater Washington D.C. area. This dividend champion has raised distributions for 39 years in a row. The stock closed at $14.71 at the end of 1999. Between 2000 and 2010, the 1999 investment in this real estate investment trust would have generated a total of $17.05 in dividends. Yield: 5.20%

Raven Industries, Inc. (RAVN), together with its subsidiaries, manufactures various products for industrial, agricultural, construction, and military/aerospace markets in the United States and internationally. This dividend champion has raised distributions for 25 years in a row. The stock closed at $2.4383 at the end of 1999. Between 2000 and 2010, the 1999 investment in this stock would have generated a total of $3.43 in dividends. Yield: 1.30%

To summarize, it matters what price you pay for a dividend stock. In addition, a high yielding stock must be able to maintain and grow the distribution for the foreseeable future. If you buy a stock for the high yield, but the dividend payment is unsustainable your dividend income will suffer and your investment will be worth less. If you purchase a stock with a low current yield, make sure it is trading at attractive valuations and that it is cheap. Then make sure that the business can afford to grow the dividend payment.


Full Disclosure: Long KFT, MO and PM

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This article was featured on Carnival of Personal Finance #322

1 comment:

  1. MO's profits fell 57% this quarter on lower volume - I'm still long on MO, but good to know how it is doing presently.

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