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 super investor 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." But Standard & Poor's has also created another similar index that it calls the High Yield Dividend Aristocrats.
According to Standard & Poor's, "The S&P High Yield Dividend Aristocrats index is designed to measure the performance of the 60 highest dividend yielding S&P Composite 1500 constituents which have followed a managed dividends policy of consistently increasing dividends every year for at least 25 years."
Let's examine the top 25 high-yield dividend aristocrats ranked by yield. For context, I've also included their five-year annualized dividend growth rate.
5-Year Dividend Growth Rate
CenturyLink (NYS: CTL)
Pitney Bowes (NYS: PBI)
Mercury General (NYS: MCY)
National Retail Properties (NYS: NNN)
Cincinnati Financial (NAS: CINF)
HCP (NYS: HCP)
Leggett & Platt (NYS: LEG)
Vectren (NYS: VVC)
Universal Corp (NYS: UVV)
Black Hills Corp (NYS: BKH)
Consolidated Edison (NYS: ED)
Atmos Energy (NYS: ATO)
Kimberly Clark (NYS: KMB)
RPM International (NYS: RPM)
WGL Holdings (NYSE: WGL )
Diebold (NYS: DBD)
Piedmont Natural Gas (NYS: PNY)
Northwest Natural Gas (NYS: NWN)
Sonoco Products (NYS: SON)
Abbott Laboratories (NYS: ABT)
UGI Corp (NYS: UGI)
Johnson & Johnson (NYS: JNJ)
Westamerica Bancorp. (NAS: WABC)
Genuine Parts (NYS: GPC)
Clorox (NYS: CLX)
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.
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At the time thisarticle was published Jim Royal, Ph.D.,owns shares of Johnson & Johnson.The Motley Fool owns shares of Clorox, Johnson & Johnson, and Abbott.Motley Fool newsletter serviceshave recommended buying shares of Johnson & Johnson, Piedmont Natural Gas, Clorox, Kimberly Clark, Abbott, and UGI, as well as creating a diagonal call position in Johnson & Johnson. 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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