Three Of Our Favorite 5%+ Yielding Stocks Now

This is a guest contribution by Bob Ciura of Sure Dividend.

With interest rates on the decline, income investors are once again put in a difficult position. Lower rates have caused yields across the spectrum of stocks and fixed income to fall. While investors have enjoyed the strong returns of the S&P 500 over the past several years, the average stock in the index now yields less than 2%.

As a result, investors who rely on stocks for income have to search harder for high yields. Fortunately, there are still many high-dividend stocks that provide much stronger levels of income than the S&P 500. The following 3 stocks each have dividend yields above 5%, and we believe their dividends are secure.

High-Yield Stock #1: AT&T Inc. (T)

AT&T is a telecommunications giant, with a market capitalization of $285 billion. It offers a wide range of telecom services such as Internet, video and wireless. It also owns the DirecTV satellite television business. AT&T has long been known as a reliable dividend growth stock. It has raised its dividend for 36 consecutive years. Plus, the stock currently has a high dividend yield of 5.4%.

Telecom stocks are typically considered slow-growth companies. 2019 was another year of steady results. Adjusted earnings-per-share increased 4% growth in the third quarter, and by slightly less than 1% over the first three quarters.

While AT&T certainly generates consistent cash flow, it also has a major growth catalyst in the form of its Time Warner acquisition. By acquiring Time Warner, AT&T now owns multiple popular media properties including HBO and CNN. It also owns the Warner Bros. studio. The deal presents strategic benefits for AT&T.

As a content distributor, AT&T was at risk of “cord-cutting”, in which people cancel their high-priced cable bundles in favor of cheaper streaming options. This poses a significant risk for AT&T’s legacy cable and DirecTV businesses. However, now that AT&T owns content, it has a valuable hedge against the risk of cord-cutting. It can also offer unique packages with its strong content lineup, to further reduce customer churn.

AT&T expects approximately 10% growth in adjusted EPS per year, through 2022 at the midpoint of management guidance. Revenue is expected to increase 1% to 2% each year, while cost synergies are likely to fuel margin expansion. AT&T expects free cash flow of $30 billion to $32 billion by 2022, which will allow the company to pay down debt from the Time Warner acquisition, and pay dividends to shareholders.

AT&T currently has an annualized dividend payout of $2.08 per share. With expected adjusted EPS of $3.65 for 2019, AT&T has a dividend payout ratio of 57%. The dividend payout is highly secure, with room for continued dividend increases.

High-Yield Stock #2: AbbVie Inc. (ABBV)

Our next top high-yield stock is AbbVie, a pharmaceutical company that was spun off from Abbott Laboratories in 2013. AbbVie was separated from its parent company so that it could focus on its own strategic initiatives, with its own dedicated management team. The results speak for themselves—from 2013 to 2018, AbbVie grew revenue and adjusted earnings-per-share by 12% and 20% each year, respectively.

AbbVie is facing some uncertainty regarding its future growth, as its flagship drug Humira will lose patent exclusivity in the U.S. in 2023. Humira is the company’s largest product by far, comprising more than half the company’s revenue in 2019. But this exposes AbbVie to patent risk, as the negative impact from biosimilar competition is significant. Humira has already lost patent exclusivity in Europe, which caused international Humira sales to fall by 29% over the first three quarters of 2019.

Fortunately, AbbVie has prepared for this outcome by investing heavily in its own pipeline. AbbVie spent over $5 billion in research and development in 2017 and 2018, to develop its own portfolio of next-generation products. This spending is paying off, as the company has a number of strong products in its pipeline. For example, Imbruvica sales increased by 30% through the first three quarters of the year. Venclexta sales more than doubled in the same time.

Overall, AbbVie’s adjusted earnings-per-share increased 12% over the first three quarters of 2019. This growth bodes well for the future. In addition, AbbVie’s growth will be accelerated by the $63 billion acquisition of Allergan (AGN), whose therapeutic areas include medical aesthetics, eye care, central nervous system, and gastroenterology. Allergan’s key product is Botox.

The acquisition diversifies AbbVie’s portfolio by adding exposure to cosmetic products. Post-acquisition, AbbVie expects to generate annual revenue of nearly $50 billion. The company also expects the acquisition to boost its adjusted EPS by 10% in the first year.

Thanks to the contributions of AbbVie’s organic investments, as well as the Allergan acquisition, we are confident the company will be able to continue growing. In the meantime, AbbVie stock pays a current dividend yield of 5.5%. And, AbbVie is a Dividend Aristocrat, dating back to its days as a subsidiary of Abbott.

High-Yield Stock #3: Exxon Mobil (XOM)

Our last high-yield stock pick is yet another Dividend Aristocrat, oil and gas giant Exxon Mobil. Exxon Mobil is the largest U.S. energy company, with a market capitalization of $280 billion. Exxon Mobil has a high dividend yield of 5.2%, and the company has increased its dividend for 37 consecutive years. This is a highly impressive history of dividend growth, particularly since Exxon Mobil operates in a cyclical industry.

Exxon Mobil is an integrated major, meaning it operates across the full spectrum of the oil and gas industry. It operates an upstream exploration and production segment, a downstream refining unit, midstream transportation assets, and a chemicals business.

Exxon Mobil, alongside the broader energy sector, has struggled against weak oil prices in recent years. West Texas Intermediate crude oil currently trades at $56 per barrel, while Brent crude, the international equivalent, trades at $62 per barrel. This has put a dent in profitability across Big Oil companies. Last quarter, Exxon Mobil’s net income declined by 49% from the same quarter the previous year.

Still, Exxon Mobil has a positive long-term future. Aside from increasing commodity prices, Exxon Mobil will grow earnings from a number of new projects coming online. According to a recent company presentation, 550 billion barrels of new oil supply is required through 2040 just to meet the anticipated demand around the world. Exxon Mobil is ramping up multiple large projects globally, in the U.S. as well as major sites in Guyana, Brazil, and more. The company forecasts earnings to grow by more than $4 billion in 2020, even with flat commodity prices. If oil prices average just $40 per barrel, Exxon Mobil still expects to grow its earnings by approximately 40% from 2017-2025.
Exxon Mobil has a long history of navigating the ups and downs of the oil and gas industry. It has raised its dividend for over 30 years in a row, and the stock currently yields 5.2%. This makes Exxon Mobil an attractive Dividend Aristocrat for income investors.

Relevant Articles:

- AT&T: A High Yield Telecom for Current Income
- Dividend Aristocrats List for 2020
- Are Energy Stock Values Today a Once in a Lifetime Opportunity?
- The Energy Company I want to buy

Three Of Our Favorite Safe Dividend Aristocrats Now

This is a guest contribution by Bob Ciura of Sure Dividend.

Investors looking for the strongest dividend growth stocks should focus on the Dividend Aristocrats. In order to become a Dividend Aristocrat, a company must be a component of the S&P 500 Index, and have raised its dividend for at least 25 consecutive years, among other criteria. There are currently just 57 Dividend Aristocrats in the S&P 500 Index.

The following three Dividend Aristocrats offer the combination of a market-beating dividend yield, low stock valuation, and strong earnings growth potential. As a result, each stock earns a buy recommendation from Sure Dividend, as they have the lowest level of dividend risk and high expected returns over the next five years.

1. AT&T Inc. (T)

Telecommunications giant AT&T is a unique Dividend Aristocrat, primarily because of its very high yield above 6%. AT&T can afford such a high dividend payout to investors, thanks to its diversified business model and prodigious cash flow. AT&T has over 100 million customers in the U.S. and a significant presence in Latin America. The company provides a wide range of telecom services, including wireless, broadband, and pay-television. AT&T generates more than $170 billion in annual revenue and the stock has a market capitalization of $238 billion.

In late April, AT&T reported first-quarter financial results. Revenue of $44.8 billion missed analyst estimates by $270 million, while adjusted earnings-per-share of $0.86 matched analyst expectations. Revenue increased 18% for the first quarter, primarily driven by the Time Warner acquisition that closed in June 2018. Adjusted earnings-per-share of $0.86 rose 1.2% from the same quarter a year ago. Revenue growth was heavily offset by rising expenses and a higher share count. AT&T’s core mobility segment grew revenue by 2.9% for the quarter, thanks to 179,000 net postpaid smartphone customer additions during the quarter.

AT&T generates a great deal of free cash flow, which will allow the company to accomplish multiple financial objectives. In addition to reinvesting in future growth efforts, AT&T can reward shareholders with dividends, and also pay down debt. The company paid off over $2 billion of debt in the first quarter, ending the period with a net-debt-to-adjusted-EBITDA ratio of 2.8x. AT&T will pursue additional debt reduction in part through asset sales, such as the recent deals to sell its stake in Hulu, as well as the $2.2 billion sale of its Hudson Yards space. AT&T expects to end 2019 with a leverage ratio of 2.5x, which will further enhance the sustainability of the dividend.

AT&T has increased its dividend each year for over 30 consecutive years, and the stock has a high yield of 6.3% today. This makes AT&T the highest-yielding Dividend Aristocrat. Considering the S&P 500 Index, on average, yields just ~2% right now, AT&T is a highly attractive stock for income investors such as retirees, with a bit of dividend growth each year as an added bonus. AT&T stock trades for a price-to-earnings ratio of 9.1, which is below our fair value estimate of 12. Through valuation changes (+5.7%), dividends (+6.3%) and future EPS growth (+3.1%) we expect total returns above 15% per year over the next five years for AT&T stock.

2. Caterpillar Inc. (CAT)

Industrial giant Caterpillar is a recent addition to the S&P Dividend Aristocrats, having joined the list in 2019. It is particularly impressive for Caterpillar to be on the list, considering it operates in a highly cyclical industry. Caterpillar manufactures heavy machinery, meaning it is closely tied to multiple industries such as construction and mining. Caterpillar’s customers tend to report high growth during economic expansion, but struggle during recessions.

Caterpillar reported strong first-quarter earnings results. Quarterly sales increased 5%, while adjusted EPS increased 19%. Resource Industries reported segment sales growth of 18% to lead the way, thanks primarily to higher equipment demand and higher prices for its equipment. Caterpillar expects 2019 to be another strong year. At the midpoint of guidance, the company expects EPS growth of approximately 12% for 2019.

Caterpillar appears to be firing on all cylinders. The U.S. economy continues to grow at a steady pace, while commodity prices remain supportive of growth. This all bodes well for Caterpillar’s future earnings growth. Services are a separate growth catalyst for Caterpillar in the years ahead. Caterpillar expects to double its Machine, Energy & Transportation services sales to $28 billion by 2026, from $14 billion in 2016.

We expect Caterpillar to earn $12.25 per share in 2019. Based on this, the stock has a price-to-earnings ratio of 11. Our fair value estimate is a price-to-earnings ratio of 15-16, slightly below the 10-year average valuation multiple of 16.7. Expansion to this level would boost annual returns by 7.1% per year over the next five years. In addition, shareholder returns will be driven by earnings growth (6%) and dividends (3.1%). Overall, we expect total annual returns above 16% per year over the next five years for Caterpillar stock.

3. Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance has increased its dividend each year for 43 consecutive years. It is a large pharmacy retailer with over 18,500 stores in 11 countries around the world. It also operates one of the largest global pharmaceutical wholesale and distribution networks in the world, with more than 390 centers that deliver to nearly 230,000 pharmacies, doctors, health centers and hospitals each year.
Walgreens is in a transition period. In response to the rise of e-commerce, Walgreens has had to invest in new growth initiatives. Brick-and-mortar retailers such as Walgreens are under immense pressure from Internet-based retailers. Fears of Amazon.com (AMZN) entering the health care industry are a constant challenge for Walgreens. Fortunately, Walgreens continue to grow revenue, thanks largely to its strong pharmacy unit.

In the most recent quarter, Walgreens’ revenue of $34.5 billion increased 5% year-over-year, as retail pharmacy sales increased 7.3%. Adjusted earnings-per-share (EPS) declined 5%, as the company dedicates additional resources to investing for the future. Walgreens is also working through reimbursement pressure, and lower generic deflation.

Walgreens is still highly profitable, with more than enough cash flow to invest for the future and pay a compelling dividend to shareholders. The company now expects adjusted EPS to be roughly flat in 2019, but we still forecast 6% annual earnings growth for Walgreens as it retains multiple competitive advantages, including its leading brand and global presence. In the meantime, investors can purchase Walgreens stock at a measurable discount to fair value.

Based on expected EPS of $6.02 in fiscal 2019. The stock has a price-to-earnings ratio of 8.6, well below our fair value estimate of 13.0. We view Walgreens as significantly undervalued. Expansion of the price-to-earnings ratio to 13.0 over five years could add 8.6% to Walgreens’ annual returns. In addition, we expect Walgreens to grow earnings by 6% per year, and the stock has a 3.4% dividend yield. Overall, Walgreens stock has expected returns of 18% per year over the next five years.

Relevant Articles:

- 2019 Dividend Champions List
- Dividend Aristocrats for 2019 Revealed
- Investing is part art, part science
- Twenty-Four Attractively Valued Dividend Champions for Further Research

3 Undervalued High-Yield Stocks with Fast Dividend Growth On Sale Today

Dividends growth stocks are great for both accumulators and retirees, although the emphasis can vary depending on your goals.

For people that are in the accumulation phase of their investing career, the emphasis is generally on total returns. People in this group rationally seek out the best stable sum of dividend growth and dividend yield, so that decades from now their wealth and passive income will be maximized.

On the other hand, people that are nearing retirement or who have reached retirement tend to have more of an eye on investment income. For them, while total returns are still important, higher current dividend yields are emphasized more strongly. The point here is for the portfolio to produce a ton of reliable income now or in the near future, and for that income to continue increasing faster than inflation over the long-term.

Compared to investment-grade bonds, high dividend stocks can produce higher yields combined with growth that exceeds inflation. In addition, qualified dividend income is taxed at a lower rate than interest income in most cases (with the exception of municipal bonds), meaning that the effective after-tax yield that you get to put in your pocket from dividends is higher than bonds that produce similar yields.

The only real catch is that even safe high-yielding stocks have volatility. During a broad market drawdown, a dividend investor’s principle wealth will decline even if their dividend income ideally remains intact, and they must resist selling at unfavorable prices in a panic. For this reason dividend stocks might not be suitable for 100% of an older investor’s portfolio, but can still provide the long-term backbone of the investment income focused strategy when cushioned by bonds and other asset classes.

With that being said, here are three attractively valued high-yielding businesses with well-protected and growing dividends.

Two Buy Stories from the Q2 Earnings Season

The following is a guest post from Mike, a former private banker and passionate investor blogging at The Dividend Guy Blog and founder of Dividend Stocks Rock.

In May, we often read a bunch of articles about stats telling us to sell away and come back in the fall. As a dividend growth investor, I always found those stories strange. After all, why would I sacrifice one or two dividend payments from my favorite stocks just because *they might* lose in value? So while others are selling, I’m keeping a close eye on the market to find buy stories.

Over the past month, I went through hundreds of quarterly earnings to find the most interesting stocks on the market. I’ve found many stories I liked, and I wanted to share 2 Kings stories with a happy ending for your portfolio. 

#1 The King with a Knee on the Floor

Source: Ycharts

Annual Market update for 2017

Good Morning,

I wanted to share the market commentary from a dividend growth investor friend of mine, who manages money. This is not a paid post, and I do not receive any compensation from him. Rather, I have interacted with Joe off and on over the past decade. He is one of those readers who have stuck around for a while, who I regularly discuss dividend investing with. Writing about investing can be a lonely pursuit, so it is definitely helpful to have someone and bounce off ideas. 

I am sharing this market commentary, which he shared privately with his clients, because a lot of his points resonate very well with me. While no two investors are alike, his strategy of finding quality dividend payers for the long term really hits home for me. The letter captures current market sentiment, investing strategy, lessons learned and general commentary. If I ever leave blogging to manage money full time, this is the type of letter I would be sharing with clients. 

Without further delay, this is the comment letter from Joe Ferris at Summer Fields Investments LLC: Source Of Letter

Dear Friends, 2017 was a remarkable year in the equity markets. The broader US stock market did not have any negative months in the year, giving it the distinction of being the strongest market, per that metric, in 90 years [1]. Furthermore, there was no correction greater than 3% in the year, which is unusual for equities. The graphic that I included over 6 months ago has proved to be correct, for now, as we have broken out, to the upside, of a long trading channel in the S&P. There are a number of reasons for this. Before the presidential election in November 2016, I thought that the Blue Team would win, and that minimum wage would be gradually raised, inflation would creep up, and goods and services would earn more revenues. This would put a higher floor in our companies' earnings, spurring the market to pay a higher multiple for our companies' earnings. Well, as we all know, the Red Team won, and now, minimum wage is being gradually raised [2], inflation is creeping up, and our company's goods and services are earning more revenues. It's funny how that happens. There is also the matter of the large corporate tax cut, which gives our companies more after-tax profits. The market has been excited by that. We have seen a number of US companies either attempt (in the case of Pfizer and Allergan) or execute (Medtronic, Johnson Controls, etc) foreign inversions in the past decade, so it makes sense to me that incentives should be provided for US companies to not pack up and run to lower tax regions. However, they should also have more regulations on tax avoidance, and that is indeed happening, with some companies getting rid of their tax shelters [3].

Two Dividend Achievers on My List for 2018

Over the years, I’ve built my own model to identify the best dividend paying companies. The core of my investment strategy has been built around dividend growth. Overtime, I didn’t want to limit myself among a short list of 19 or 51 companies and rather starting the study of a wider group; the achievers.

The Dividend Achievers Index refers to all public companies that have successfully increased their dividend payments for at least ten consecutive years. At the time of writing this article, there were 265 companies that achieved this milestone. With the right combination of metrics, this list is probably the best starting point to build your dividend growth portfolio or to find your next addition.

As we start a new year, I’m fairly positive about the upcoming months. I believe 2018 will mark the 10^th consecutive year of this bullish market. I’ve selected two companies from the Achievers list that should continue to reach higher levels this year. 

HASBRO (HAS)

Source: Ycharts

My Favorite Pick Right Now

This is a guest post written by Mike McNeil, author of the Dividend Guy Blog and co-founder of Dividend Stocks Rock. Mike is currently investing $100,000 in a 100% dividend growth portfolio as the market trades at an all-time high.

Regardless where I look these days, I read alarming news about the stock market. Government debts are through the roof, there are tensions among many countries, debt is “too cheap” and we make a bad use of it, interest rates are climbing up and the stock market doesn’t listen to reality, like Icarus reaching for the sun. As Icarus’s story, once our wings will be burned by the sun, the fall will be fatal. This is obvious; everything is set to have the market crashes and burns.

I recently quit my job as a private banker to work full-time on my investing website Dividend Stocks Rock (DSR).  This is how I received $108,000 as a lump sum for my pension. What am I going to do with this new money? What should I do as a dividend investor? Should I keep money aside and wait for a correction?

This could be argued to be an interesting strategy if you think you can time the market. However, for a dividend growth investor, we should all know that time in the market is a lot more important than market timing. We should ignore the noise and keep investing. This is what I’m doing anyway. I decided to invest it all in the stock market now; because when the stock market goes down like this:

The Magic Dividend Cocktail

This is a guest post by Mr Tako, who writes about investing and financial independence over at Mr Tako Escapes. The author is a financially independent dividend investor, who focuses his time on his family, investing and blogging. Mr Tako is living off dividends in retirement, which is the ultimate goal for most of us.

The dream of dividend growth investing is a dream about passive income -- An ever growing stream of passive income that lasts for decades and requires very little work to maintain.
That was my dream anyway, and for the most part I achieved it.

Unfortunately, the dream of passive income is easier to dream about than it is to achieve.  It takes work.  Dividends don't just keep growing out of "thin air" -- Companies have to actively make the right moves to keep those beautiful dividends growing.

This means investors must also find the right companies to stay invested in -- the ones with dividends that grow faster than inflation for long periods of time.

How does an investor find companies like these?  One great place to start is by identifying the four methods by which companies grow dividends...

Five Tips to Avoid Dividend Cuts

This is a guest post by Brian Bollinger from Simply Safe Dividends. Brian is a CPA and was an equity research analyst at a multibillion-dollar investment firm prior to founding Simply Safe Dividends. Simply Safe Dividends is a one-stop shop for dividend investors, providing online tools, research, and data designed to help generate safe retirement income from dividend stocks, while saving you the high fees associated with other financial products and advisors.

Have you ever held a stock that eventually cut its dividend?

Or do you worry that a company you own might have to reduce its dividend in the future?

If so, you aren’t alone.

Most of the dividend investors I know are focused on building a safe income stream (typically for retirement) and want to preserve their capital.

Avoiding dividend cuts can help with both objectives, and in this article I will explore five techniques that can help identify companies with the best potential of delivering safe, growing dividends over time. 

But first, I want to thank Dividend Growth Investor for letting me share with you.

His blog has been an inspiration and a wealth of quality information for dividend investors for nearly a decade, and it’s an honor to be part of it today.

Let’s take a look at five of the most important factors you can use to understand the safety of a company’s dividend and make better informed investment decisions.

Why I Use Dividend Growth Investing to Get Wealthy

Mark Seed is passionate about personal finance and investing and is the blogger behind My Own Advisor. Mark is currently investing in dividend paying stocks on his journey to financial freedom. He is almost halfway to his goal of earning $30,000 per year in tax-free and tax-efficient dividend income for an early retirement. You can follow Mark on his path to financial freedom here.

I wasn’t always a dividend growth investor. In fact, for a good part of my 20s, I wasn’t much of an investor at all. As a young Canadian kid fresh out of university having secured my first full-time (real) job at a major pharmaceutical company, I didn’t think very much about my financial future. Sure, I knew enough to “pay myself first” (and I did) to the tune of about $50 per month in my registered investment account, similar to a 401(k), but I was focused on living for today. And who isn’t for the most part in their 20s – you only live once right?

The reality check

As you get older in life, you realize more and more you don’t know what you don’t know. You also figure out when it comes to investing in particular, by owning some pricey mutual fund investments, you’re paying steep money management fees for products that have no chance to outperform the market over time. You also learn the fees paid in money management fees is money you’ll never see again. It’s a massive double-whammy that occurs in Canada, and the United States, and pretty much anywhere around the world. This is part of the reality check that led me to dividend growth investing.

How to Use Real Estate to Create Dividend-Like Income

This is a guest post from Chad Carson from CoachCarson.com. Chad started with only $1,000 in the bank and was able to build up a real estate empire that now consists of over 90 units

Thank you to Dividend Growth Investor for letting me share with you today. It's an honor!

Over the last 15 years, I've used real estate investing as a vehicle to achieve financial independence. Everyone has their own idea of life after financial independence, but in my case, it involves my family and travel to other countries.

Currently my wife, two young daughters, and I are living in Ecuador in South America for 14 months. We're having new experiences, my daughters are enrolled in local Spanish speaking schools, and we're all learning and growing together.

And relevant to this article, real estate income pays for it all!

In the rest of this article, I'll share lessons that have helped me get to this point using real estate. I can assure you my journey has been far from perfect, but I hope my successes and failures will help with your own journey.

Dividend Growth Investing vs Rental Properties

Dividend Growth Investing My Way To Financial Freedom

About the Author: FT is the founder, editor, and blogger behind Million Dollar Journey (est. 2006). Through various financial strategies outlined on MillionDollarJourney.com, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014 - at the age of 35. Since 2014, he has been on a new mission of growing his passive income through dividend growth investing to the point of exceeding his recurring expenses within the next couple of years.

Hello DGI readers, it's an honor to write for a site dedicated to dividend growth investing. When I started my blog in 2006, I was a few years out of school and was getting serious about building wealth. I dabbled in real estate investing, online trading, and even buying and selling online. While those can be some lucrative strategies, what really worked for me was the simple strategy of saving and investing the proceeds, which is what ultimately as grown our net worth the most over the years.

There are many methods of saving money and I have probably tried most of them. However, I have learned to focus on the strategies that have the biggest impact. For us, it was delaying lifestyle inflation as much as possible while banking those raises. The act of keeping life simpler than our peers allowed us to generate healthy monthly cash flow. We initially used the cash flow to pay off debt (student loans and mortgage) but after, we focused on investing. Although we eventually upgraded our housing and even our vehicles when we had kids, we continue to live below our means and build our net worth.

After reaching millionaire status when I was 35, I shifted focus from growing net worth to growing passive income sources. Having the choice to work at something that I'm interested in without having to worry about how much I'm going to be paid resonates with me. Not worry about money? How is this possible you say? Through creating stable and predictable passive income streams that require very little work. For some, it may be a real estate rental business, or some other type of business. I've tried a lot of different strategies and I've discovered that dividend investing works the best for me.

Why Dividend Growth Investing

Why Magellan Midstream Partners Is the Best Dividend Growth Opportunity for 2017

Energy output has boomed across the country, and this little-known dividend stock could make investors a fortune.

New technologies have unlocked billions of barrels of oil and gas, even at prices that were once unthinkable. Traders betting the farm on drilling stocks over the past few months earned themselves overnight windfalls.

But when it comes to energy investing, the real money isn’t always in the firms doing the grunt work. “Pick-and-shovel” businesses provide the vital tools and services to a booming industry. Rather than taking the “all-or-nothing” route of searching for the next big strike, selling rigs, gear, and equipment can be a safer (and more lucrative) way to profit.

One of my favorites? Magellan Midstream Partners, L.P. (NYSE:MMP). This partnership owns pipelines, terminals, and processing plants across the country. And while it doesn’t get a lot of interest in the press, it’s one of my top dividend growth stocks for a couple of reasons.

Honeywell Beats GE On The Following Four Points

This guest post has been wrote by Mike McNeil, passionate investor, founder of Dividend Stocks Rock and author of The Dividend Guy Blog.

The current bull market hides many companies flaws. In fact, since 2009, almost all stocks have gone up one way or another. My 11-year-old boy could probably do as well as most investors on the street. This situation makes it even more difficult for investors to differentiate the good picks from the bad seeds. For example, when you look at the Honeywell (HON) and General Electric (GE) stock price graph for the past 5 years, both seem to be a good investment:

Source: YCharts

While Honeywell (HON) clearly outperformed General Electric during this period, most GE shareholders won’t complain about its performance. I know that General Electric is a very popular stock among investors. The company has been around for over 100 years, and has performed quite well for decades. However, I believe the current bull market is hiding many flaw, and Honeywell is a better option for those who look at adding an industrial stock to their portfolio. Ironically, Honeywell  failed to merge with General Electric back in 2001.

As a dividend growth investor, my focus when analyzing companies is payouts and potential increase. In order to do so, I have studied 3 components leading to sustainable payment increase as per the 7 dividend growth investing principles:

Three Of My Favorite Dividend Stocks For 2017

This guest post has been written by Mike McNeil, passionate investor, founder of Dividend Stocks Rock and author of The Dividend Guy Blog.

In the beginning of this New Year, many investors review their portfolios. We all hope for a good year on the market and, most importantly, steady dividend growth increase among our portfolio. I selected three companies I think will perform well in 2017 and will increase their dividend payouts.

3M (MMM)

Business model:

3M (MMM) produces products like Scotch tape, projector systems, Post-it notes, Tartan track, and Thinsulate. This is a conglomerate that produces products for many industries and for both personal and business use, and their manufacturing, research, and sales offices are all over the world.

Holding Through the Good Times

This guest post was written by Joe Ferris, who is a long-time reader of the site. The author now manages money professionally and creates individualized dividend portfolios for individuals, families, and institutions. He charges less than most mutual funds and more than most indexes. He has over 60 happy clients and is based in California. Californian readers may contact him at admin@summerfieldsinvestments.com if they are interested in inquiring about his portfolio management business

I am a long time reader of this blog. DGI has helped me solidify a solid investment strategy over the many years of my reading his blog, and I have enjoyed our personal correspondence over the last 6-7 years or so. Recently, in the course of our correspondence DGI asked me if I would want to write a guest blog, and I happily agreed. His posts on university endowments primarily using their interest and dividends, and not dipping into their principal, changed my way of thinking about investing and the capital markets

One day in 2010, I read this particular article, which analyzed V.F Corporation (VFC) . It made a lot of sense to me, and after further research, I decided it would be appropriate to initiate a position. I did so, buying VF Corporation at a split adjusted cost of $20.85 per share in January of 2011.

Well-known value investor Li Lu described during a presentation how he sometimes scrutinizes a company's management, even investigating the owner of an apparel company at his synagogue and asking around about his character. This was in reference to Timberland, then run by Jeffrey Swartz, a descendant of the founder. Lu was impressed with both management and the company. Apparently, VF Corporation was too, because in June of 2011 they acquired Timberland. After this acquisition, the market saw good potential in VF Corporation future earnings, and the share price went up.

My personal journey with dividend stocks

This is a guest post by Financially Integrated who writes about dividend investing, wealth creation and escaping the rat race.

I have been attracted to dividend stocks for the better part of a decade. Over that time, my approach to investing in dividend stocks has changed somewhat, but the central theme remains high quality wide moat businesses that return a regular, growing stream of income.

I stumbled onto dividend stocks as a result of personal investment failures. My initial investing experiments in my early 20's were focused on chasing internet stocks with unsustainable business models. I had wrongly reasoned that they were a solid way to build quick wealth.

Unfortunately, what soon became apparent to me was that these were often businesses with poor economics and no sustainable competitive advantages. It cost me valuable time and money to ultimately figure this out, as my losses in these positions mounted.

I soon embraced Warren Buffet's Rule No 1, which is to never lose money. I realized that the best way to do this was to invest in businesses that have sound defensive positions and which generate significant cash flow. I also noticed that many of these high quality businesses happen to return significant cash flow back to shareholders in the form of dividends.

Key lessons I learned from my investment in Pfizer

This is a guest post written by Todd Wenning, CFA, who is an equity research analyst. Todd is the author of Keeping Your Dividend  Edge: Strategies for Growing & Protecting Your Dividends. The opinions expressed here and in the book are those of the author and not those of his employer.

In July 2008, just as the financial crisis was picking up steam, I bought some shares of the pharmaceutical giant, Pfizer. At the time, Pfizer had a trailing dividend yield of 6.9%. I thought this was a slam dunk investment. After all, Pfizer had increased its dividend for over 40 consecutive years, had recently boosted its payout by 10%, had a AAA-rated balance sheet, and was in a defensive industry that should, it seemed, hold up relatively well in a poor economy.[i] Even with Pfizer facing generic competition and slowing sales, declining dividend coverage, and a well-above average dividend yield, it seemed Pfizer was well-positioned to withstand some short term turbulence.

	2008	2007	2006	2005
Revenue (million)	$48,296	$48,418	$48,371	$51,298
Dividends per Share	$1.28	$1.16	$0.96	$0.76
Free cash flow cover	2.04	1.41	0.80	1.56
Earnings cover	0.94	1.01	2.77	1.43

Source: Company filings, Author calculations.

A few months later in January 2009, I was having lunch with a colleague and we began discussing the sweeping dividend cuts that were occurring at the time. “I’m shocked at the types of companies that are cutting their payouts,” I remember him saying, “General Electric, Dow Chemical…and today was Pfizer.”

Financial independence by collecting underpants? Are you serious?

This is a guest post from Tawcan, who writes about dividend investing and financial independence on his blog at tawcan.com

When it comes to the concept of early retirement, it is not a strange or unfamiliar idea for me. My dad semi-retired in his mid-40’s and fully retired in his early 50’s; my cousin retired before he turned 40. Having family members that retired early meant I knew early retirement is indeed possible; I just need to have a plan and put my mind to it.

Growing up, my parents have always taught me to be frugal, save money, so I can eventually retire early one day.

But like the underpants gnomes in South Park, I had an incomplete plan. You see, the gnomes had the following business plan:

1. Collect Underpants
2. ???
3. Profit
My early retirement plan was like below:
1. Save money
2. ???
3. Early retirement

I had no idea what it takes to go from step 1 to step 3. Step 2 was a complete mystery to me. Although my dad and cousin have gone through the three steps, I was too ignorant to ask them for advice. I wanted to figure this out for myself.

It wasn’t until I was in my late 20’s that I began to figure it out with my wife (whom I’ll call Mrs. T from now on). In late 2011 we had our financial epiphany in which we determined what we needed to do in step 2 to achieve early retirement.

The magic in step 2 is of course creating passive income… or in our case, dividend income! This is why I provide dividend income updates on my blog every month.

Before we get into more details about our dividend income, let’s step back a bit.

The Importance of Revenue Growth In Selecting Winning Investments

This is a guest post from JC, who writes about dividend investing on Passive Income Pursuit. JC has been a dividend growth investor since 2011 focusing exclusively on dividend paying stocks for his long term portfolios.

Over the last couple weeks I've been writing about how companies grow and why it's so important to see how the growth is coming because not all growth is created equal.  Today I wanted to give an example of the differences that can arise if you just look at the numbers as reported instead of digging into them yourself.  But first a quick recap.

Revenue growth is one of my favorite metrics to look at for a company.  I don't have any numbers to back up my claim, but I think you'll all agree that a growing revenue stream leads to rising profits which leads to my personal favorite, a sustainably increasing dividend.  It's pretty safe to say that you won't find many companies that have a lengthy dividend growth streak that haven't also grown their revenue.  That's why I feel it's so important to monitor the top line and how it's growing.

Companies have 4 ways to organically grow the top line and another way to manufacture that growth.

The 4 organic growth avenues are:

1.    Price Increases - Real

2.    Volume Growth - Real

3.    Market Share - Real

4.    New Products - Real

The truly excellent companies are able to capitalize on all 4 of these sources and take advantage of opportunities as they come.  Whenever you find a company that is able to increase prices while also growing their volumes you ears should perk up.