Tuesday, November 4, 2008

5 Best Performing dividend stocks so far in 2008

The markets have been pretty bearish for investors this year as news about banks failures, the economic slowdown as well as the rise and fall in commodities prices have created havoc in the hearts of individual investors. In these volatile market conditions even a well diversified portfolio would have had a hard time making money as globalization in the financial markets lead to bear market declines in stocks wordwide including emerging markets as well as developed economies. There were only a few safer heavens including most treasury and higher grade corporate bonds. Another asset class that has outperformed the markets so far in 2008 is the dividend aristocrats’ index. Dividend Aristocrats are stocks which have increased their dividends for more than 25 consecutive years. These stocks represent companies which have survived the inflationary 1980s, the 1990’s and the new economy bubble. Chances are most will continue increasing their payments even during the current financial crisis.

The dividend stocks which helped the dividend aristocrats' index outperform S&P 500 in 2008 include:

Not surprisingly two of the stocks include discount retailers Family Dollar and Wal-Mart which typically profit during economic slowdowns as consumers prefer to go on one stop shopping trips at places believed to offer the best bargains for their buck.
Another two stocks which I am not at all surprised to see are Rohm & Haas and Anheuser-Busch. ROH is in the middle of being taken over by Dow Chemical while BUD is in the middle of an acquisition by Inbev. ROH shareholders recently approved the merger with Dow Chemical, which is expected to close in early 2009. The current prices at which ROH stock is trading relative to the $78/share in cash offered by Dow Chemical, represents a potential arbitrage opportunity.
The current stock price of Anheuser-Busch (BUD) also presents a potential arbitrage opportunity as its trading at deep discounts relative to the $70/share offer by Inbev. The offer is subject to shareholder approval on a meeting which will be held on November 12.

The company that definitely is surprising to see in the top 5 dividend performers is BB&T (BBT) which is a company that provides banking and trust services for small and mid-size businesses, public agencies, local governments, and individuals in the United States.
Overall I believe that the only stock that doesn't look promising to me at the moment could turn out to be BBT.
Full Disclosure: Long FDO and WMT

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