Many investors, such as Warren Buffett, praise defensive investing. As Buffett's mentor Benjamin Graham recommended, investing with a margin of safety can be highly valuable in especially inflationary environments.
Defensive investors prefer high dividend yielding stocks since these stocks provide better protection in loose monetary environments. On the other hand, high dividend yields are not the only important criteria that investors seek in defensive stocks. Conservative investors also look for consistent dividend growth in each high dividend yielding stock. We think the stocks that have long records of increasing dividend payments are appealing to defensive investors that demand consistency and some inflation protection.
We compiled a list of mega-cap U.S. stocks that achieved consistent dividend growth and paid high current dividend yields. The market data are sourced from Fidelity. All companies in this list increased their dividend payments every year since 2005. These stocks have market capitalizations above $5 billion and 12-month dividend yields of at least 4%.
| Dividend Yield | 5-Year Average Div. Growth | 52-Week Return | |
Boardwalk Pipeline Partners | 7.60% | 7.73% | 1.78% | |
Buckeye Partners L.P. | 6.51% | 5.92% | 16.68% | |
Kinder Morgan Energy Partners | 6.46% | 7.07% | 15.68% | |
Plains All American Pipeline | 6.43% | 6.51% | 11.41% | |
Enterprise Products Partners | 5.89% | 6.07% | 25.72% | |
AT & T | 5.65% | 5.28% | 26.20% | |
Williams Partners L.P. | 5.64% | 13.56% | 26.22% | |
Oneok Partners L.P. | 5.61% | 5.50% | 42.37% | |
Magellan Midstream Partners | 5.38% | 6.39% | 35.39% | |
BCE Inc. | 5.25% | 7.49% | 28.88% | |
HCP Inc. | 5.15% | 2.46% | 10.14% | |
The Southern Company | 4.77% | 4.05% | 22.52% | |
Consolidated Edison Inc. | 4.56% | 0.85% | 23.84% | |
Shaw Communications Inc. | 4.38% | 27.79% | 11.46% | |
Xcel Energy Inc. | 4.28% | 3.87% | 19.65% | |
Kimberly Clark Corp. | 4.26% | 7.39% | 7.83% | |
CenterPoint Energy Inc. | 4.23% | 5.66% | 42.67% | |
Dominion Resources Inc. | 4.17% | 7.38% | 19.03% | |
Digital Realty Trust Inc. | 4.00% | 20.74% | 0.40% | |
TransCanada Corp. | 3.99% | 5.59% | 22.86% | |
AVERAGE | 7.87% | 20.54% | ||
Since 2005, these 20 large-cap U.S. stocks have increased their cash dividends every year and their 5 year average dividend growth is 7.87% on average. In the last 52-week period, the average return of these 20 stocks was 20.54%. No stock in this group had a loss in the past 12 months, whereas all stocks except three – BWP, KMB and DLR – provided double digit returns in the same period.
The top 10 highest dividend yielding large-cap U.S. stocks with consistent dividend growth are as follows:
1. Boardwalk Pipeline Partners: Boardwalk Pipeline Partners is a U.S. energy company providing natural gas transportation and storage services in the United States. BWP has a high dividend yield of 7.60% and returned 1.78% during the past 12 months. In the past 5 years, BWP increased its dividend payments 7.73% on average. The stock has a market cap of $5.46B and P/E ratio of 19.10. Robert Raiff and Jim Simons are prominent BWP investors.
2. Buckeye Partners L.P.: Buckeye Partners LP is a U.S. energy company distributing petroleum in the United States. BPL has a 6.51% dividend yield and returned 16.68% during the past 12 months. In the past 5 years, BPL increased its dividend payments by 5.92% annually. The stock has a market cap of $5.71B. John Phelan's MSD Capital holds $30 Million of BPL. Frank Brosen's Taconic Capital and Michael Messner's Seminole Capital are also among BPL investors.
3. Kinder Morgan Energy Partners: Kinder Morgan Energy Partners is a U.S. energy company providing energy products transportation and storage services. KMP has a 6.46% dividend yield and returned 15.68% during the past 12 months. In the past 5 years, KMP increased its dividend payments by 7.07% annually. The stock has a market cap of $23.21B and P/E Ratio of 54.32. Michael Messner's Seminole Capital has more than $20M in KMP.
4. Plains All American Pipeline: Plains All American Pipeline Partners is a pipeline company providing energy products transportation, storage and marketing services in the United States and Canada. PAA has a 6.43% dividend yield and returned 11.41% during the past 12 months. In the past 5 years, PAA increased its dividend payments by 6.51% annually. The stock has a market cap of $9.00B and P/E ratio of 24.14. Dmitry Balyasny and Chuck Royce hold the two largest PAA positions among the 300+ funds we are tracking.
5. Enterprise Products Partners: Enterprise Products Partners is a pipeline company distributing natural gas and crude oil in the United States, Canada and the Gulf of Mexico. EPD has a 5.89% dividend yield and returned 25.72% during the past 12 months. In the past 5 years, EPD increased its dividend payments by 6.07% annually. The stock has a market cap of $34.47B and P/E ratio of 106.74. John Osterweis' Osterweis Capital holds nearly $70M of EPD. Chuck Royce is also among EPD investors.
6. AT&T: AT&T is a large telecommunications company providing telephone, internet and TV services. T has a 5.65% dividend yield and returned 26.20% during the past 12 months. In the past 5 years, T increased its dividend payments by 5.28% annually. The stock has a market cap of $180.21B and P/E ratio of 9.00. Phill Gross' Adage Capital has the largest position in T, holding nearly $400M of the stock (See the entire list of hedge funds that are bullish about T here)
7. Williams Partners L.P.: Williams Partners L.P. is a US energy company operating in natural gas exploration, processing, storage and transportation. WPZ has a 5.64% dividend yield and returned 26.22% during the past 12 months. In the past 5 years, WPZ increased its dividend payments by 13.56% annually. The stock has a market cap of $14.74B and P/E ratio of 17.78. Jean-Marie Eveillard's First Eagle holds more than $85 Million of WPZ. Jim Simons' Renaissance Technologies also have WPZ in its portfolio.
8. Oneok Partners L.P.: Oneok Partners L.P. is a US energy company providing natural gas processing, storage and transportation services in the United States. OKS has a 5.61% dividend yield and returned 42.37% during the past 12 months. In the past 5 years, OKS increased its dividend payments by 5.50% annually. The stock has a market cap of $8.35B and P/E ratio of 20.03. Jim Simons' Renaissance Technologies holds the largest OKS position among 300+funds we are tracking.
9. Magellan Midstream Partners: Magellan Midstream Partners a U.S. energy company providing transportation and storage services for refined petroleum products. MMP has a 5.38% dividend yield and returned 35.39% during the past 12 months. In the past 5 years, MMP increased its dividend payments by 7.49% annually. The stock has a market cap of $6.46B and P/E ratio of 18.79. John Osterweis' Osterweis Capital holds more than $60 Million of MMP. Chuck Royce and Michael Messner are also among OKS investors.
10. BCE Inc.: BCE Inc. is a telecommunications company providing telephone and Internet services primarily in Canada. BCE has a 5.25% dividend yield and returned 28.88% during the past 12 months. In the past 5 years, BCE increased its dividend payments by 6.39% annually. The stock has a market cap of $29.19B and P/E ratio of 13.78.
One stock that didn't make our list but came very close is Intel (INTC). Intel recently increased its quarterly dividend to 21 cents and its' stock price is currently $21.42. If INTC's stock price declines another two percent it will satisfy our criteria. We believe Intel is on its way to become a dividend champion.
Disclosure: I am long T.
