Dividend-paying companies are an oasis in the desert of underperforming stocks. They offer solid payouts today and the promise of capital gains tomorrow. According to a study by Ibbotson, reinvested dividends made up about 40% of total stock returns from 1926 to 2006. In fact, dividend investing is so appealing that superinvestor Warren Buffett has made it a significant component of his portfolio.
When searching for great dividend stocks, it makes a lot of sense to start with companies that have been playing the dividend game the longest. Standard & Poor's has culled the dividend winners from the also-rans in a list it calls the "dividend aristocrats."
Let's examine the top 25 fastest-growing yields among these dividend aristocrats. For context, I've also included their trailing yield.
5-Year Average Annual Dividend Growth Rate
CenturyLink (NYS: CTL)
Lowe's (NYS: LOW)
McDonald's (NYS: MCD)
Walgreen (NYS: WAG)
Target (NYS: TGT)
AFLAC (NYS: AFL)
W.W. Grainger (NYS: GWW)
Wal-Mart (NYS: WMT)
Automatic Data Processing (NAS: ADP)
Clorox (NYS: CLX)
Becton, Dickinson (NYS: BDX)
PepsiCo (NYS: PEP)
VF Corp (NYS: VFC)
Ecolab (NYS: ECL)
Hormel Foods (NYS: HRL)
Procter & Gamble (NYS: PG)
Sigma-Aldrich (NAS: SIAL)
Archer-Daniels-Midland (NYS: ADM)
Family Dollar Stores (NYS: FDO)
Leggett & Platt (NYS: LEG)
Chubb (NYS: CB)
Air Products & Chemicals (NYS: APD)
Dover (NYS: DOV)
Abbott Laboratories (NYS: ABT)
Johnson & Johnson (NYS: JNJ)
Source: Capital IQ, a division of Standard & Poor's.
These aren't formal recommendations -- just ideas for your own further research. Still, they could give you a great start toward find companies capable of paying rising dividends for a quarter-century or more. You can find the list of highest yields here.
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At the time thisarticle was published Jim Royal, Ph.D.,owns shares of P&G, J&J, and McDonald's.The Motley Fool owns shares of Clorox, PepsiCo, Abbott, AFLAC, Johnson & Johnson, and Wal-Mart.Motley Fool newsletter serviceshave recommended buying shares of Becton, Clorox, Abbott, Procter & Gamble, McDonald's, ADP, Lowe's, AFLAC, J&J, Wal-Mart, and PepsiCo; creating diagonal call positions in Wal-Mart, J&J, and PepsiCo; and writing covered calls on Lowe's. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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