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Summary

  • I searched for perhaps the "safest" dividend stocks of the past decade.
  • What emerged is a list of stocks that maintained and grew their dividends during two bear markets.
  • Most on the list outperformed during the same period.

Welcome to the third update on perhaps the "Safest" dividend-growth stocks of the past twelve years. This has proven to have been a particularly interesting period for review because it contained two bear markets. With the stock market on fire the past two years it remains important to remember that bear markets do occur.

I'm retired and began investing in stocks in 2011. I was invested totally in the cash account of my 401K when the market fell apart in 2008. We began taking monthly withdraws from our account in 2009 and it became apparent by 2011 that we couldn't remain in cash, which by then was paying less than inflation.

As I embarked on my journey to become a self-directed investor, before starting, I received an important piece of investing advice from my wife…Don't lose money! From the beginning I was attracted to stocks that paid a dividend. I did not as yet know specifically about dividend-growth investing and how it would ultimately become the investing approach that would help me sleep well at night.

2011 was a hard year to start as a self-directed investor. Safe to say I lost a lot of sleep. With a lot of luck, however, I somehow managed to end my first year with a gain of over 6%, while the market was flat. I said to myself, 2012 would be different. I set out to find the safest dividend stocks by back testing for the period 2002-2011. From that effort emerged a select group of stocks I call my "Safety Superstars."

During this same period, I discovered Seeking Alpha and dividend-growth investing. I also discovered that most of my "Safety Superstars" enjoyed another tier of safety. They were included in the list of Dividend Champions, Challengers and Contenders (CCCs) maintained by Seeking Alpha contributor David Fish, updated monthly and available free through this link.

Each stock featured had the distinction of not cutting its dividends but in fact growing them in 2008 and 2009 when so many companies were doing just the opposite. I realized that such a fact provided an important second tier of safety particularly if such dividend growth outpaced inflation.

I first wrote about the Superstars back in April of 2012. The link to that series is available here.

I am pleased to own many of these stocks. Some are not part of my portfolio because they were overvalued at the time most of my purchases were made. Others were rejected because they yield less than the 2.7% yield I currently require for a purchase.

In Part One of this two part series we examine the "Safest of the Safe" - a select group of stocks that shared the following characteristics:

  • Each is a Dividend Champion, Challenger or Contender, meaning it has maintained and grown its dividend in each year from 2002 to the present. As a group the stocks had a five-year Dividend Growth Rate of 9.94%
  • Each stock suffered less than half the loss of the S&P 500 during 2002 and 2008.
  • Each stock incurred no more than two down years during this turbulent 12 yr. period.

27 stocks maintained their status as Level One Safety Superstars as we entered 2013. Realty Income slipped to Level Two status as a result of its 2013 Return.

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

I have included Morningstar Value ratings where available.

**** Undervalued ***Fairly Valued **Overvalued

Name

Ticker

Today's

Yield

5 Year Dividend

Growth Rate

10 Year

Ave Return

2013

Return

Wisconsin Energy **

(NYSE:WEC)

3.43

21.08

13.05

16.11%

Vectren Corp.

(NYSE:VVC)

3.61

1.74

8.39

25.60%

National Health Investors

(NYSE:NHI)

4.91

5.7^

12.92

4.76%

J.M. Smucker's

(NYSE:SJM)

2.26

11.8

9.63

10.32%

Realty Income ***

(NYSE:O)

-1.75%

Tanger Shopping Centers ***

(NYSE:SKT)

2.71

3.4^

16.37

-3.79%

Darden Restaurants ***

(NYSE:DRI)

4.39

22.5

10.89

25.29%

Cleco Corp.

(NYSE:CNL)

3.08

9.6

13.90

5.01%

Consolidated Edison ***

(NYSE:ED)

4.58

1.0^

7.24

3.96%

Enbridge ***

(NYSE:ENB)

2.6

14.6

19.71

3.67%

Stock

Ticker

Yield %

5-Year

DGR

%

10 Year Ave

Return

2013 Return

Coke ***

(NYSE:KO)

2.98

8.1

6.46%

3.60%

Flowers Foods

(NYSE:FLO)

2.35

11.7

17.08%

22.60%

Colgate-Palmolive **

(NYSE:CL)

2.32

13.4

10.45%

10.01%

Digital Realty Trust

(NYSE:DLR)

5.75

20.3

13.59 5 year ave

1.83%

Omega Healthcare Investors

(NYSE:OHI)

5.42

9.3^

18.0%

23.26%

Health Care Reit ***

(NYSE:HCN)

5.03

2.5^

11.09

12.40%

McCormick ***

(NYSE:MKC)

2.06

9.1^

8.96%

26.00%

Republic Service Group

(NYSE:RSG)

2.94

6.6^

8.34%

6.46%

Chevron

(NYSE:CVX)

3.49

9.0^

12.8

1.64%

Stock

Ticker

Yield %

5-Year

DGR

10 Year Ave

Return

2013 Return

Sunoco Logistics Partners**

(NYSE:SXL)

3.02

14.0^

25.26

56.50%

Clorox****

(NYSE:CLX)

3.30

9.4

7.56

30.37%

General Mills**

(NYSE:GIS)

2.94

11.5^

10.58

26.99%

Procter & Gamble****

(NYSE:PG)

3.19

8.8

6.05

23.40%

V.F. Corp***

(NYSE:VFC)

1.67

9.5^

19.42

67.60%

Genuine Parts Co**

(NYSE:GPC)

2.32

7.0^

10.0

34.22%

SCANA Corp**

(NYSE:SCG)

4.04

2.1^

6.9

7.27

McDonald's

(NYSE:MCD)

3.19

13.9

16.36

13.54

Those of you currently building a dividend-growth portfolio should certainly give the above stocks your due diligence. I personally hold 13 of these stocks. A link to my complete personal portfolio is available here. 13 of these stocks share the distinction of satisfying the "chowder rule", aka, The Total Dividend Return metric.

Be certain to give preference to those that are fairly valued or undervalued. I also recommend that a stock purchase you make be in accordance with a personal portfolio business plan fashioned from your investing objectives and personal risk tolerance. If you'd like a look at mine it's available here.

Thanks again for reading, for commenting and for being such an important part of my investing education. As always, your comments are appreciated.

Source: A Review Of The Dividend Safety Superstars