These 47 S&P 500 Dividend Aristocrats Are Good Investment Opportunities

Standard & Poor's Dividend Aristocrats are the elite dividend payers in the S&P 500. To be included, each company is required to have a minimum track record of 25 consecutive years of higher dividends. But this group has been shaken after the market meltdown. Seven banks in the group have been or will be dropped from the group after their dividend cuts. The most embarrassing was Bank of America (BAC), a Dow stock, which 2 years ago bragged about its track record of growth (including dividends) especially over the previous 30 years. At the beginning of the credit crisis, thecompany raised the dividend to a $2.56 annual rate. Just a few months later, it must have regretted that decision. Now it only pays a token dividend, and rejoining this group is a minimum of 25 years away. Early this year, 3 prominent members of the group, Pfizer (PFE), General Electric (GE) and Masco (MAS), cut their dividends which will take them off the list by December.

The S&P group has been reduced from about 60, to 51. By my calculations, at least 3 will be removed by year end. The number of new members must be small since these companies already need streaks of 23 or 24 years to be added to the group in the next year or two.

However their fundamentals remain. These are Warren Buffett's kind of stocks, with Coca Cola (KO) as his largest single investment. Major ones which have already increased dividends this year include Dow stocks: 3M (MMM), Coca Cola (KO), Johnson & Johnson (JNJ), McDonald's (MCD), Procter & Gamble (PG) and Wal-Mart (WMT). The remaining Dividend Aristocrats have generally grown stronger on a relative basis, especially those which have already increased dividends this year.

Below is the list (prepared by Standard & Poor's in March 2009) that I adjusted by deleting companies already announcing dividend cuts. In addition, Cincinnati Financial Corp (CINF) and M&T Bank Corp (MTB) each need a dividend increase by year's end to remain on the list. Based on estimates for 2009 EPS, each one should be considered "iffy" regarding another dividend increase. If there is no increase, that company will be dropped from the list. The remainder of the Dividend Aristocrat list (shown below) can be used for investment ideas. These companies have survived (and to some degree thrived) during the worst economic recession in 75 years. Dividends and dividend increases are important for successful investing. Data from Standard & Poor's shows that over the long term, 1/3 of gains come from dividends and 2/3 from growth. Yields from dividends provide significant help in achieving excellent rates of return for the very smart investor.

S&P Dividend Aristocrats

• Abbott Laboratories (ABT)
• Archer-Daniels-Midland Co (ADM)
• Automatic Data Processing (ADP)
• AFLAC Inc (AFL)
• Air Products & Chemicals Inc (APD)
• Avery Dennison Corp (AVY)
• Bard, C.R. Inc (BCR)
• Becton, Dickinson & Co (BDX)
• Bemis Co Inc (BMS)
• Chubb Corp (CB)
• Cincinnati Financial Corp (CINF)
• Clorox Co (CLX)
• Centurytel Inc (CTL)
• Dover Corp (DOV)
• Consolidated Edison Inc (ED)
• Emerson Electric Co (EMR)
• Family Dollar Stores Inc (FDO)
• Gannett Co Inc (GCI)
• Grainger, W.W. Inc (GWW)
• Johnson Controls Inc (JCI)
• Johnson & Johnson (JNJ)
• Kimberly-Clark (KMB)
• Coca-Cola Co (KO)
• Leggett & Platt (LEG)
• Lilly, Eli & Co (LLY)
• Legg Mason Inc (LM)
• Lowe's Cos Inc (LOW)
• McDonald's Corp (MCD)
• McGraw-Hill Cos Inc (MHP)
• 3M Co (MMM)
• M&T Bank Corp (MTB)
• Pitney Bowes Inc (PBI)
• PepsiCo Inc (PEP)
• Procter & Gamble (PG)
• PPG Industries Inc (PPG)
• Rohm & Haas Co (ROH)
• Sherwin-Williams Co (SHW)
• Sigma-Aldrich Corp (SIAL)
• Questar Corp (STR)
• Supervalu Inc (SVU)
• Stanley Works (SWK)
• Integrys Energy Group Inc (TEG)
• Target Corp (TGT)
• VF Corp (VFC)
• Walgreen Co (WAG)
• Wal-Mart Stores (WMT)
• Exxon Mobil Corp (XOM)

Disclosure: I own KO, LLY & VFC.

Comments

[Dividend Gr...:]

Avy,

There are several companies on your " list", which have cut dividends in 2009 several months ago.Ganett (GCI) and Legg Mason (LM) are such examples.

Rohm and Haas(ROH) which is also on your list, has been bought out by Dow Chemical several months ago as well.

Check these articles below for an up-to date list of the dividend aristocrats to avoid in 2009:

www.dividendgrowthinve...

www.dividendgrowthinve...

Best Regards,

Dividend Growth Investor

Jul 15 01:27 PM

[THofler:]

I happily own 4 of the above, as well as a few Master Limited Partnerships. The more I learn about the MLPs the more I wonder why I should own anything else? They are tax advantaged & pay high distribution yields. Check out the info at the web site below, especially the presentations and publications page,

naptp.org

Why own the aristocrats? For diversification, of course, since MLPs are entirely in the energy space.

I also like most any foreign high dividend stock with a good future. Since the dollar has recovered some of its value in the FX markets in recent months, now is a good time to move some of one's portfolio out of the dollar and into these foreign stocks ahead of the next dollar decline. I like the Euro integrated oils (BP, E, TOT) and recently picked up some of the Brazilian utility CPFL Energia (CPL).

Jul 15 11:40 PM

[Dividend Gr...:]

THofler,

Most Aristocrats would generate very good inflation adjusted streams of dividend income. For example some investors who purchased JNJ, PG, MCD, MO 15-20 years ago are now generating double digit yields on cost. MLPs are great for now, but what happens if the US government decides to abolish the MLP structure ( just like the canadian government decided to abolish the income tax structure iby 2011)? chances are yields on MLPs would drop..

In addition to that, when interest rates start increasing,MLPs might be affected negatively in the process.


On Jul 15 11:40 PM THofler wrote:

> I happily own 4 of the above, as well as a few Master Limited Partnerships.
> The more I learn about the MLPs the more I wonder why I should own
> anything else? They are tax advantaged & pay high distribution
> yields. Check out the info at the web site below, especially the
> presentations and publications page,
>
> naptp.org
>
> Why own the aristocrats? For diversification, of course, since MLPs
> are entirely in the energy space.
>
> I also like most any foreign high dividend stock with a good future.
> Since the dollar has recovered some of its value in the FX markets
> in recent months, now is a good time to move some of one's portfolio
> out of the dollar and into these foreign stocks ahead of the next
> dollar decline. I like the Euro integrated oils (BP, E, TOT) and
> recently picked up some of the Brazilian utility CPFL Energia (seekingalpha.com/symbo...).

Jul 16 07:11 AM

[David Van K...:]

I'm afraid this article is not very well researched. Just last week I published an article on "22 Stocks on the S&P Dividend Aristocrats List That May Spell Trouble. The article can be viewed here: seekingalpha.com/artic... No fewer than 11 of the current Aristocrats have either cut their dividends in the last year or held them steady for more than a year. Several others have very low yields. Rohm & Haas does not exist any more.

The point is that additional research is needed into companies on the S&P Dividend Aristocrats list, because S&P only updates the list once per year, in December. The mere appearance of a company on the list cannot be taken at face value that the company is a "good dividend stock."

Jul 16 10:48 PM

[whisperonth...:]

Krawler2, that's a terrific link! I love it. Thank you.

THofler, that website looks great in Internet Explorer (and I like the website), but if you're a Firefox user, give up. It just doesn't look the same. I've contacted the website owner previously, and they are aware that there is a problem. So far, nothing has been fixed. So if any of you want to view the website, use IE.

Jul 21 09:03 AM

[THofler:]

Mr. Div.Growth, I agree with your point. I'm concerned about our gov. on steroids kicking the investor yet again.

Has anyone really analyzed this issue? For example, wouldn't the Feds have to hammer the entire partnership tax model; and don't the tort lawyer firms operate as partnerships and currently own a number of Democrats?

Jul 22 02:11 PM