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High dividend yielding stocks are among the best options for defensive investors seeking some inflation protection. On the other hand, some stocks with relatively lower dividend yields may still be appealing to defensive investors because of their consistency. These stocks had long records of increasing dividend payments. Their dividend yields remained low due to larger increases in their stock prices. We think the stocks that were able to increase dividends in the last few years are attractive options for conservative investors that demand consistency and protection in the upcoming inflationary environment.

We compiled a list of 27 mega-cap US stocks that achieved consistent dividend growth and paid high current dividend yield. The market data are sourced from Fidelity. All companies in this list increased their dividend payments every year since 2005. These stocks have market capitalization above $12 billion and 12-month dividend yields between 2% and 3%.

Dividend Yield

5-Year Average Div. Growth

52-Week Return

PepsiCo Inc.

PEP

2.93%

11.41%

17.55%

Kellogg Co.

K

2.92%

7.85%

12.56%

McDonald's Corp.

MCD

2.85%

29.50%

32.42%

Northorp Grumman Corp.

NOC

2.84%

10.76%

47.69%

Travellers Companies Inc.

TRV

2.77%

9.54%

24.08%

Coca Cola Co.

KO

2.76%

8.68%

40.07%

Wal-Mart Stores Inc.

WMT

2.73%

16.86%

13.49%

Automatic Data Processing Inc.

ADP

2.67%

14.24%

39.87%

Colgate-Palmolive Co.

CL

2.62%

12.63%

15.30%

AFLAC Inc.

AFL

2.53%

18.20%

11.97%

Target Corp.

TGT

2.50%

24.57%

-1.52%

Medtronic Inc.

MDT

2.48%

20.30%

11.26%

General Dynamics Corp.

GD

2.48%

15.36%

32.91%

Chubb Corp.

CB

2.48%

9.30%

30.01%

PPG Industries

PPG

2.48%

3.50%

54.63%

Emerson Electric Co.

EMR

2.42%

9.17%

33.89%

Air Products and Chemicals Inc.

APD

2.41%

11.27%

51.96%

The McGraw-Hill Companies

MHP

2.36%

6.61%

54.91%

Lowe's Companies

LOW

2.35%

36.08%

18.98%

Exxon Mobil Corp

XOM

2.29%

7.99%

48.43%

3M Co.

MMM

2.28%

3.64%

26.10%

VF Corp.

VFC

2.26%

2.75%

60.30%

Stanley Black & Decker Inc.

SWK

2.23%

7.17%

50.44%

United Technologies Corp.

UTX

2.13%

12.62%

43.13%

Norfolk Southern Corp.

NSC

2.08%

20.11%

49.52%

Archer Daniels Midland Co.

ADM

2.08%

9.86%

22.00%

T.Rowe Price Group Inc.

TROW

2.03%

17.23%

41.07%

AVERAGE

13.23%

32.70%

Since 2005, these 27 US stocks have increased their cash dividends every year and their 5 year average dividend growth is 13.23% on average. In the last 52-week period, the average return of these 27 stocks was 32.70%. Only TGT in this group had a loss in the past 12 months, whereas all other stocks provided double digit returns in the same period.

Here are the top 10, highest dividend-yielding, mega-cap US stocks on our list:

1. PepsiCo Inc. (NYSE:PEP): PepsiCo Inc. is a multinational company providing non-alcoholic beverages worldwide. PEP has a 2.93% dividend yield and returned 17.55% during the past 12 months. In the past 5 years, PEP increased its dividend payments annually by 11.41%. The stock has a market cap of $110.95B and P/E ratio of 18.82. Boykin Curry, Bill Miller and Ric Dillon are among prominent PEP investors.

2. Kellogg Co. (NYSE:K): Kellogg Co. is a large provider of convenience foods and cereals. K has a 2.92% dividend yield and returned 12.56% during the past 12 months. In the past 5 years, K raised its dividend payments annually by 7.85%. The stock has a market cap of $20.10B and P/E ratio of 17.31. Phill Gross’ Adage Capital holds the largest K position among the 300+ funds we are tracking. (Check out Phill Gross’ other top holdings)

3. McDonald's Corp. (NYSE:MCD): McDonald's Corp. is a one of the largest fast-food chains in the world. MCD has a 2.85% dividend yield and returned 32.42% during the past 12 months. In the past 5 years, MCD increased its dividend payments 29.50% on average. The stock has a market cap of $88.87B and P/E ratio of 18.11. Both Peter J. Eichler Jr. and James Crichton hold more than $150 Million of MCD. Ric Dillon and Jim Simons are also among MCD investors.

4. Northorp Grumman Corp. (NYSE:NOC): Northorp Grumman Corp. is a global US company operating in aerospace, defense technology and electronics industries. NOC has a 2.84% dividend yield and returned 47.69% during the past 12 months. In the past 5 years, NOC raised its dividend payments 10.76% on average. The stock has a market cap of $19.49B and P/E ratio of 10.16. Jean-Marie Eveillard’s First Eagle and Cliff Asness’ AQR Capital are among top holders of NOC.

5. Travellers Companies Inc. (NYSE:TRV): Travellers Companies Inc. is a US company that operates in insurance business.TRV has a 2.77% dividend yield and returned 24.08% during the past 12 months. In the past 5 years, TRV raised its dividend payments annually by 9.54%. The stock has a market cap of $24.76B and P/E ratio of 8.06. Mason Hawkins’ Southeastern Asset Management had more than $750M in TRV at the end of March 2011. David Einhorn also holds more than $200 Million of TRV. (See David Einhorn’s favourite stocks)

6. Coca Cola Co. (NYSE:KO): Coca Cola Co. is one of the largest providers of non-alcoholic beverages in the world. KO has a 2.76% dividend yield and returned 40.07% during the past 12 months. In the past 5 years, KO increased its dividend payments annually by 8.68%. The stock has a market cap of $155.88B and P/E ratio of 13.14. Warren Buffett has the largest holding in KO. (See Warren Buffet’s top stock picks)

7. Wal-Mart Stores Inc. (NYSE:WMT): Wal-Mart Stores Inc. is global company operating retail store chains worldwide. WMT has a 2.73% dividend yield and returned 13.49% during the past 12 months. In the past 5 years, WMT raised its dividend payments annually by 16.86%. The stock has a market cap of $185.82B and P/E ratio of 12.42. Warren Buffett had more than $2B of WMT at the end of March 2011.

8. Automatic Data Processing Inc. (NASDAQ:ADP): Automatic Data Processing Inc. is a leading provider of integrated computing and business outsourcing in the world. ADP has a 2.67% dividend yield and returned 39.87% during the past 12 months. In the past 5 years, ADP increased its dividend payments 14.24% on average. The stock has a market cap of $26.93B and P/E ratio of 22.00. Jean-Marie Eveillard’s First Eagle holds more than $150 Million of ADP.

9. Colgate-Palmolive Co. (NYSE:CL): Colgate-Palmolive Co. is US company providing healthcare and personal consumer products worldwide. CL has a 2.62% dividend yield and returned 15.30% during the past 12 months. In the past 5 years, CL raised its dividend payments annually by 12.63%. The stock has a market cap of $43.25B and P/E ratio of 18.51. Lansdowne Partners holds the largest position in CL among the 300+ funds we are tracking.

10. AFLAC Inc. (NYSE:AFL): AFLAC Inc. is a leading provider of supplemental insurance services in the United States. AFL has a 2.53% dividend yield and returned 11.97% during the past 12 months. In the past 5 years, AFL raised its dividend payments annually by 18.20%. The stock has a market cap of $22.18B and P/E ratio of 10.66. Bill Miller had nearly $200 Million in AFL at the end of March 2011.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 27 Mega-Caps With Consistent Dividend Growth