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At the end of 2011, I set out to establish a portfolio that would serve to produce an income stream from dividends that would help fund my retirement. I was looking for specifically for stocks with a track record of safety. If there were capital gains, then that was a bonus. As a retiree, I was more interested in a steady stream of income, protection from inflation and preservation of capital.

I set up a screen to look for all stocks paying dividends of at least 2% and had finished 2011 with gains. 200-plus stocks made the cut. Next, I evaluated the individual performance of each stock for each of the 10 years included in this testing period (2002-2011). I was particularly interested in stocks that out-performed the S&P 500 during the severe bear markets of 2002 and 2008.

Emerging from my back testing were stocks that had gains, while the S&P was down over 23% in 2002 and over 38% in 2008. I found a large number of stocks that suffered less than half the loss of the S&P and had offset those losses by the gains they made the following year. To earn the distinction of being a Safety Superstar, the stock must not have incurred more than two down years during the tested 10-year period.

These best-performing stocks emerging from my back testing are what I refer to as my Safety Superstars -- Level One. Each also has the distinction of being among the over 450 Dividend Champions, Challengers and Contenders complied by David Fish. The CCCs, as they are often called, did not cut their dividends during the bear markets of 2002 and 2008, they raised them. In fact, they raised them for each of the 10 years I reviewed. I believe that every Dividend Growth investor must download this free list regularly and make it one of their considerations when considering a stock for purchase. The link to the most current edition is here:

http://dripinvesting.org/Tools/Tools.asp

As you're about to see, these stocks did well on every level during the turbulent 10-year period of 2002 -2011. How many repeated their success in 2012? Of the 31 stocks in this select group, 6 ended 2012 in the black. Only one stock, Kinder Morgan Partners (KMP), drops to Level Two. I'll be reporting on the success of Level Two next time around.

The following charts include current yield, 5 year dividend growth rates and average annual return for the 10 years of review. The average yield for this group of 31 stocks is 3.75%. The 5 year DGR for the group was 10.39% a year, clearly keeping up with inflation and then some. During the same period, the group reported an average annual gain of 12.56% vs. an average annual gain in capital for the S&P 500 of 0.9%.

All stocks are presented for your personal review based on your own evaluation of value and your own investing goals.

Name

Ticker

Yield

5 Year Dividend Growth Rate

10 Year Ave Return

2012 Return

Wisconsin Energy

WEC

3.1

17.7

15.1%

5.41%

Vectren Corp.

VVC

4.8

2.4

7.4%

(2.75%)

National Health Investors

NHI

5.0

5.3

20.2%

28.54%

J.M. Smuckers

SJM

2.5

10.6

10.9%

10.32%

Realty Income

O

4.6

2.7

15.9%

15.02%

Tangier Shopping Centers

SKT

2.7

13.4

25.0%

16.64%

Darden Restaurants

DRI

3.2

28.4

8.5%

(1.12%)

Cleco Corp.

CNL

3.1

4.5

10.2%

5.01%

Consolidated Edison

ED

4.1

0.9

10%

(10.46%)

Enbridge

ENB

2.9

14.1

23.2%

16.60%

Stock

Ticker

Yield %

5-YearDGR

%

10 Year Ave Return

2012 Return

Kinder Morgan Partners

KMP

5.7

7.2

15.9%

(6.07%

Coke

KO

2.8

8.7

6.8%

3.60%

Flowers Food

FLO

3.5

22.5

19.74%

22.60%

Colgate Palmolive

CL

2.5

12.7

7.0%

10.01%

Digital Realty Trust

DLR

4.75

20.7%

34.2% - 7 yr. ave

1.83%

Omega Healthcare Investors

OHI

8.3

10.1

19.1%

23.26%

Health Care Reit

HCN

5.5

2.2

15.9

12.40%

McCormick

MKC

2.2

9.2

11.6%

26.00%

Republic Service Group

RSG

3.3

14.4

9.5%

6.46%

Chevon

CVX

3.2

9.0

12.8

1.64%

Stock

Ticker

Yield %

5-YearDGR

%

10 Year Ave Return

2012 Return

Sunoco Logistics Partners

SXL

4.5

9.8

26.4%

26.22%

Clorox

CLX

3.5

14.8

8.1%

10.01%

General Mills

GIS

3.06

11.1

7.2

.02%

Novartis

NVS

4.7

7.8

7.1%

10.72%

Procter & Gamble

PG

3.33

11.2

7.9

1.77%

V.F. Corp

VFC

2.1

6.2

15.7%

14.46%

Genuine Parts Co

GPC

2.82

6.3

9.0

3.89%

SCANA Corp

SCG

4.33

3.2

9.8

1.29%

Southern Company

SO

4.3

4.0

9.9%

(7.52%)

McDonalds

MCD

2.9

20.4

17.1

(12.08%)

Stock

Ticker

Yield %

5-YearDGR

%

10 Year Ave Return

2012 Return

Air Products & Chemical

APD

3.3%

10.7%

2.4%

5.41%

Source: Dividend Growth Safety Superstars - 2012 Update