The 10 Best U.S. Dividend Stocks 43 comments
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In everything we do, we always want to be the best or be associated with the best. You never hear fans yelling, ‘We’re number 2, we’re number 2′, while holding two fingers in the air. The same is true when selecting dividend stocks.
This is an article that I started to write several times, but would always stop after getting mired in the details. My natural tendency is make every question an analytical exercise and solve it by modeling and crunching numbers.
This time, I will show some restraint and take a little different approach by relying more on my subjective instincts. To that end, here are my selections for the 10 best U.S. dividend stocks:
10. Automatic Data Processing Inc. (ADP) – Analysis
ADP is one of the world’s largest independent computing services companies, provides a broad range of data processing services. The last slot was the most difficult to fill, due to the number of worthy companies. I considered all the Honorable Mentioned companies listed below and it came down to ADP and GPC. ADP gt the nod due its historic low debt levels and dividend payout.
9. Wal-Mart Stores (WMT) – Analysis
WMT Inc. is the largest retailer in North America. Great management, business plan and execution. It would have ranked higher, but WMT’s dividend yield tends to be lower end of my acceptable range.
8. The Coca-Cola Company (KO) – Analysis
KO is the world’s largest soft drink company. The Coca-Cola name is the world’s most recognizable trademark. For those who see no value in intangibles, try selling carbonated sugar water under another name.
7. McDonald’s Corporation (MCD) – Analysis
MCD is the largest fast-food restaurant company in the world. This company has grown its dividends at an incredible rate. Unfortunately, that is likely to slow, but MCD’s international presence will benefit to its shareholders in the future.
6. Abbott Laboratories (ABT) – Analysis
Abbott Laboratories is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products. Not the biggest or most well known drug company, but the one that arguably has one of the better track records.
5. Emerson Electric Co. (EMR) – Analysis
EMR primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. Industrials are not supposed to do well in recessions. Someone forgot to tell EMR. It has endured some bumps in the road, but has held up quite well.
4. SYSCO Corporation (SYY) – Analysis
SYY through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. This is a company that continues to perform in the face of expert predictions that it won’t.
3. 3M Co. (MMM) – Analysis
MMM is a diversified technology company with a presence in various businesses. This is a company I really like. Problem is so do a lot of other people and institutions. It is a stock you have to watch for the right entry point. I bought in March when the stock was trading in the high 40’s, it is now trading in the low 70’s.
2. The Procter & Gamble Company (PG) – Analysis
PG is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries. Good management capable of adjusting when necessary. Currently working to adjust to new market dynamics of the economic downturn.
1. Johnson & Johnson (JNJ) – Analysis
JNJ engages in the manufacture and sale of various products in the health care field worldwide. This was an easy selection for my top spot. Though not perfect the company has a history of making good decisions and executing on them.
The following companies earned an Honorable Mention:
- Genuine Parts Co. (GPC) – Analysis
- United Technologies Corp. (UTX) – Analysis
- Nucor Corporation (NUE) – Analysis
- PepsiCo, Inc. (PEP) – Analysis
That’s my 10 best U.S. dividend stocks. These are based on what stocks I believe will perform well as income investments over-time. Most are not good buys today, but are ones that I am always watching. Obviously, there is a great deal of subjectivity in a list like this. I would love to see your 10 best dividend stocks (doesn’t have to be U.S.)
Disclosure: Long ABT, WMT, KO, MCD, ADP, EMR, SYY, MMM, PG, JNJ, GPC, UTX, NUE, PEP. See a list of all my income holdings here.
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It pays 7.5% dividend which they just recently increased by the way. And available at a reasonable PE ratio.
Check it out folks.
10. Exxon Mobil (XOM): XOM has increased its dividend every year for 26 years in a row. Additionally, the company is within 23% of 52-week low with a dividend payout ratio of 41%.
9. Abbott Laboratories (ABT): ABT has increased its dividend every year for 36 years in a row. ABT is within 22% of the 52-week low with a dividend payout ratio of 41%. I have written about ABT on September 21, 2009 displaying the altimeter for ABT on a long term basis.
8. McCormick & Co. (MKC): MKC has increased its dividend every year for 22 years in a row. Also, MKC is within 20% of the 52-week low with dividend payout ratio of 42%.
7. Becton Dickinson (BDX): BDX has increased its dividend every year for 36 years in a row. BDX is within 19% of the 52-week low with a dividend payout ratio of 27%. I mentioned BDX on May 4, 2009, suggesting that this stock should be bought. On August 19, 2009, I reiterated my claim that BDX was worthy of consideration, especially after Warren Buffett himself had jumped on board after our May 4th posting.
6. Piedmont Natural Gas (PNY): PNY has increased its dividend every year for 29 years in a row. PNY is within 16% of the 52-week low with a dividend payout ratio of 69%.
5. Northwest Natural Gas (NWN): NWN has increased its dividend every year for 54 years in a row. NWN is within 16% of the 52-week low with a dividend payout ratio of 59%. NWN has been presented by me on September 22, 2009 and finally on October 3, 2009.
4. Bard Inc. (BCR): BCR has increased its dividend every year for 54 years in a row. BCR is within 14% of the 52-week low with a dividend payout ratio of 13%. Bard Inc. was first mentioned on Dividend Inc. on April 23, 2009. At the time, I mentioned that BCR has a very low debt level which allows the company to weather further economic declines. On August 26, 2009, after gaining 10.11% in 4 months, I recommended selling this stock.
3. Weyco Group (WEYS): WEYS has increased its dividend every year for 28 years in a row. WEYS is within 13% of the 52-week low with a dividend payout ratio of 54%. Weyco, the maker of Florsheim shoes, was featured on Dividend Inc. on July 6, 2009. Two negatives for this company are that there payout ratio is so high and stock is not very liquid.
2. Cardinal Health (CAH): CAH has increased its dividend every year for 16 years in a row. CAH is within 10% of the 52-week low with a dividend payout ratio of 32%. CAH was featured on June 4, 2009 and is considered, in my opinion, one of the most underpriced healthcare stocks out there. The current low price of CAH is due to the spinoff of the CareFusion (CFN) unit. However, the upside projections of CAH are, at minimum, in the $40 range.
1. Wal-Mart (WMT): WMT has increased its dividend every year for 33 years in a row. WMT is within 8% of the 52-week low with a dividend payout ratio of 30%. WMT was first mentioned on June 18, 2009 when I pointed out the fact that with such an extended range bound price for the stock there has to be value accruing in the stock. A further examination of WMT was done on September 19, 2009, in that assessment I determined that, on a price-to-dividend basis, WMT is poised in increase in value. One significant downside for this stock is the large increase in shares outstanding in the last few years. Touc.
www.dividend.com/histo...
They spun off 2 companies in that time. You'd have a wonderful dividend portfolio including Kraft and PM if you held on.
On Oct 09 04:10 PM StockData.org wrote:
> @Darrencardinal: because MO seems to like cutting it's dividend....
> check it out
>
> www.dividend.com/histo...
And you have no MLP's? Kinder Morgan, Buckeye Pipelines, etc.?
Come on, man. No offense...well, offense...you have to do your homework better than with what you present.
Many of us here on SA could top your top ten, ten fold. Okay, at least three fold.
Pains me to be harsh on you, but please, in the future, when you're throwing out ideas on this website, do your homework a little better.
Yet, everyone of your stocks deserve attention, from those who do not pay attention.
How'd you get that blue ribbon?
Mayascribe: the author stated that these 10 companies were the results of his "subjective instincts." Nowhere did he say that these companies were a definitive listing...
The secret is to pick a put option at a strike price below the current price which expires in the next month or so. Sell that put and keep enough cash on hand to buy the stock if the put is exercised at the strike price.
If the price doesn't go down, the put expires and you get to keep the premium (kind of a dividend). If the price does go down and the put is exercised, you own the stock at the put's strike price (and you keep the premium too). As long as you're happy to buy at the strike price, you're buying a good dividend paying stock at a discount to a price you're OK with.
Example:
WMT is trading at $49.97 as of the close on 10/9/09. There are November 09 options which expire in about 6 weeks. If you think that WMT is a good buy at $47.50, you can sell the Nov $47.50 puts for about $42 each (1 option per 100 shares) by setting aside $4750 in cash in your account.
If WMT doesn't drop below $47.50 before it expires on Nov 20, you get to keep that $42 premium for nearly a 1% return (in 6 weeks) on the $4750 you set aside. You can then repeat the exercise with December puts.
If WMT drops to $47 near expiration on Nov 20. Your put may be exercised and you will buy 100 shares of WMT for $4750, but you get to keep the $42 premium, so your net cost is actually $4708 for 100 shares of a stock you decided would be a good buy at $47.50.
It takes a bit more work, but if the stock price just waffles around the same price, you can collect significant premium income waiting for the price to decline to your buy point.
The difficulty is finding a broker who will let you sell puts backed by enough cash to purchase the shares at the strike price. They are out there if you look.
There are 3 great ones not included but the key is getting these at the right prices
On Oct 08 08:39 AM Evil B wrote:
> XOM doesn't make the list?
I've spent a lot of time in Europe and SE Asia and their brands are the hot sellers and growers. Add in huge margins and management who is dedicated to returning $ to shareholders and you have a winner.
thanks for article and good list
It would be good to review the performance of your recommendation since this article was first published. Although some would argue that a person should invest and forget when it comes to dividend paying stocks, I would say that knowing your winners and losers helps to keep your selection trim and fit. The average return of the stocks selected in my top ten has been 4.39% since 10/9/2009. I'd love to know your take on the performance since your last recommendation on October 7th.
Below is the full article link to my update on the top ten stocks.
dividendinc.blogspot.c...
Best regards,
Touc
Dividend Inc.
Results:
S & P 500 - Total Return (with Dividends): 4.87%
D4L Top 10 List - Total Return (with Dividends): 9.36%
Though this is a fantastic return, a portfolio like this is really geared as a long term investment, so a 1 month+ performance is not really an accurate performance assessment for this type of portfolio's end goals.
This type of portfolio is geared towards taking advantage of a steady stream of increasing dividends, with less emphasis on capital appreciation. Capital appreciation is taken in consideration when creating an entry point or adding additional shares. Also, though a 3-4% yield may seem small today, a better measure of the yield in stocks like this is "Yield on Cost," which may turn into a nice 6% a couple of years after the initial purchase.
Where a fund like this really shines is during down markets, where asset value is taking a nosedive, yet you are still receiving that steady stream of increasing dividends, and can simply ride out the price fluctuations until it returns to back to a good level, though in this case, these stocks are pretty boring so don't have those wild swings compared with more speculative choices. You actually want them to be as "boring" as possible.
Personally I use a very similar type of assessment as D4L for my core holdings, and then complement this with bond funds, REITs, and MLPs. I would really like to have some exposure to alternative assets in my dividend portfolio, but due to the nature of those types of assets, there really aren't any income-oriented alternative asset funds available.
On Nov 16 09:34 AM Dividend Inc wrote:
> Greetings D4L,
>
> It would be good to review the performance of your recommendation
> since this article was first published. Although some would argue
> that a person should invest and forget when it comes to dividend
> paying stocks, I would say that knowing your winners and losers helps
> to keep your selection trim and fit. The average return of the stocks
> selected in my top ten has been 4.39% since 10/9/2009. I'd love
> to know your take on the performance since your last recommendation
> on October 7th.
>
> Below is the full article link to my update on the top ten stocks.
>
> dividendinc.blogspot.c...
>
>
> Best regards,
>
> Touc
> Dividend Inc.