Give me a dollar today, and I want two tomorrow.
Since I am a greedy person, I look for companies that have continuously increased dividends and have managed to buy back shares. By decreasing the number of shares, a company is increasing the ownership stake each share accounts for -- or in other words, your shares now give you a bigger piece of the pie.
United Parcel Service (NYS: UPS) has increased its dividend 10 times in the past 11 years, and the payout has more than tripled since 2000. Currently, the dividend yield is 2.9%. The company has a payout ratio of 49%, meaning that it gives back nearly half of its profits to shareholders in the form of a dividend. Over the past seven years, the share count has decreased by about 14%.
Although Johnson & Johnson (NYS: JNJ) management receives shares as part of their compensation packages, since late 2005, the company has decreased share count by 8%, or about 242 million shares! Johnson & Johnson also pays a dividend with a yield of 3.6%. While the company has been decreasing the share count, it has been increasing the dividend. In 2005, Johnson & Johnson paid out $1.28 per share, and this year, the payout will be $2.25. The company has increased the dividend every year for the past 49 years, which shows the dividend is here to stay. I would bet on it to continue to increase.
ExxonMobil (NYS: XOM) has consistently bought back its shares throughout its long history. Since 2002, the share count has dropped an astonishing 28.5%! During that same time frame, the company has more than doubled its quarterly dividend from $0.23 in 2002 to the current $0.47, which gives the oil company a yield of 2.2%. Exxon also has a low payout ratio of 22%. This number is right in line with rivals like Chevron (NYS: CVX) , also at 22%, and BP (NYS: BP) at 23%, and with other peers like Royal Dutch Shell (NYS: RDS.A) or ConocoPhillips (NYS: COP) with higher payout ratios of 32%, Exxon still may have room to increase the dividend in the future.
All three of these companies understand the importance of giving back to the shareholders and continuing to build long-term value. Discover 10 more great dividend stocks (along with one I've already highlighted here) in our special report: "Secure Your Future With 11 Rock-Solid Dividend Stocks!"
Editor's note: A previous version of this article mistakenly said that UPS had raised its dividend every year since 2002. The Fool regrets the error.
At the time thisarticle was published At the time this article was written, Fool contributor Matt Thalman owned shares of BP but no other companies mentioned above. The Motley Fool owns shares of United Parcel Service and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Chevron, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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