The Dividend Aristocrats are an elite group in the S&P 500 with minimum track records of 25 consecutive years of dividend increases (30 to 40+ is common). Those track records can be helpful in selecting attractive investments. But after the recession last year, some with very long track records were dropped including: General Electric (NYSE:GE), Masco (NYSE:MAS) and Pfizer (NYSE:PFE). The remaining Dividend Aristocrats, while not exempt from being dropped in the future, are more highly regarded as quality investments.
Dividend Aristocrats I like with yields above 4% are:
Eli Lilly (NYSE:LLY)__________5.6%
Leggett Platt (NYSE:LEG)_____5.1%
Pitney Bowes (NYSE:PBI)____6.2%
When a stock yields more than 4%, an investor has to assume a little extra risk in the investment. The higher yield compensates for added risk. But strong finances of the Dividend Aristocrats enabled them to continue raising dividends even during a difficult time.
LLY is an old line drug company facing a substantial loss of revenue from patent protection on important drugs. They have gotten through the post Prozac period and should be able to get through the next years. KMB suffers from being thought of as a (boring) paper company with strong brand names. But earnings are growing and the dividend is well covered.
PBI has been inching up the dividend in this decade, a tough time for them. But they joined the group a few years ago and plan to continue as a member. LEG is an old line company making components for other products. They did not cover the dividend in the last 2 years, but expect to cover this year and have strong finances allowing them to purchase treasury stock (this year they authorized repurchase of an additional 10 million shares).
When yields on alternative investments are so low, a little extra research can uncover attractive rates. For those who don't want to accept the extra risk associated with 4+% yields, other prominent Dividend Aristocrats offer 3+% yields. For example, I've had Coca Cola (NYSE:KO) for many years and the dividends have grown more than fivefold (helped by reinvested dividends) making for an excellent investment.
Disclosure: Author long LLY, PBI and KO