1 Thing Great Stocks Have in Common

Over the past week, I've been transfixed by a data table included in a recent presentation by the chief financial officer of M&T Bank, a regional bank that operates predominantly in the Northeast.

The table lists the best-performing stocks from the "entire universe" of publicly traded companies and sorts them according to compound annual growth rate since 1980.

In an article on Friday, I wrote about Eaton Vance , the top stock on the list. According to M&T's data, the asset management and advisory company has achieved a market-leading CAGR of 25.2% over the past 33 years. Translated into dollar figures, a $1,000 investment in Eaton Vance in 1980 would be worth well more than $1.3 million today.

And in an article yesterday, I wrote about Gap , the best-performing stock on the S&P 500 over the same time period. Thirty-three years later, a $1,000 investment in the popular retail chain would be worth $1.2 million.

When I was writing these articles, I couldn't help wondering what these stocks, as well as the other 20 on M&T's list, had in common. What was it about the underlying companies that allowed them to be so ridiculously successful in terms of shareholder return?

The answer, it turns out, may be much simpler than you'd imagine. That is, with only a handful of exceptions, the best stocks since 1980 have consistently both paid and increased their quarterly dividend payouts.

Wal-Mart , which comes in sixth on the list, serves as a textbook example. Over the past 20 years, the retail giant has boosted its dividend at a compounded annual rate of 19.65%, paying out a total of $35 per share since 1993 alone.

The same is true for eight of the other top 12 companies on the list as well.

Now, to be fair, there are exceptions to this rule. Berkshire Hathway , which comes in 15th on M&T's list, is foremost among them. Since Warren Buffett took the helm in the late 1960s, it has only once paid a dividend. And with respect to that one time, Buffett is quoted as saying, "I must have been in the bathroom when the decision was made."

But as in almost all areas, Berkshire is an outlier. The general rule is instead more appropriately expressed by the companies in the preceding chart.

The takeaway couldn't be more obvious. As my colleague Dan Caplinger recently implored, "Investors should advocate for greater payouts on their dividend stocks." Given the figures seen here, I couldn't agree more.

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