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The S&P 500 Dividend Aristocrats Index is a very prestigious and popular index among dividend investors. The Index measures the performance of blue-chip S&P 500 companies that have increased their dividends for at least 25 consecutive years. The large-cap companies in this index must also have an average daily trading volume of at least $5 Million for the six months prior to the index reference date.

In a previous article, we have already indicated that the Dividend Aristocrats Index beat the S&P 500 index over the past 1, 3, 5 and 7 years. Since the beginning of 2011, the companies in the S&P 500 Dividend Aristocrats Index returned -5.28% vs. -8.09% for the SPY. Average dividend pay-out ratio of all 42 stocks in the S&P 500 Dividend Aristocrats Index is 44%, while the average dividend yield of all 42 stocks is 3.12%. (The market data are sourced from Standard & Poor's and Fidelity.)

As we are concerned about the Fed’s loose monetary policy, we believe investors should protect themselves against inflation. Following the recent downturn in stock markets, many Dividend Aristocrats have become much more appealing to defensive investors. For such investors, we compiled a list of the top 20 S&P 500 Dividend Aristocrats by annualized dividend yields. The average annualized dividend yield of these 20 stocks is 4.12%, while their dividend payout ratio is 57% on average. We think these 20 Dividend Aristocrats that are able to increase dividends are attractive options for defensive investors that demand better risk-return combination and some inflation protection.

CenturyLink Inc. (CTL): CenturyLink Inc. is a leading integrated communications company providing Internet services in the United States. CTL recently traded at $34.07 and has an 8.51% dividend yield. CTL lost -23.66% since the beginning of this year. The company has a 86% dividend payout ratio. The stock has a market cap of $21.77B and a P/E ratio of 14.96. Steven Cohen had more than $100 Million in CTL at the end of June (see Steve Cohen’s top stock picks).

Pitney Bowes Inc. (PBI): Pitney Bowes Inc. is an American company that provides packaging and mailing hardware, software and related services worldwide. PBI has an 8.06% dividend yield but lost -20.23% since the beginning of this year. The company has a 66% dividend payout ratio. The stock has a market cap of $3.07B and a P/E ratio of 11.06. Daniel Bubis, John A. Levin, Jim Simons, David Dreman and Phill Gross are prominent PBI investors.

Cincinnati Financial Corp. (NASDAQ:CINF): Cincinnati Financial Corp. is a U.S. insurance company specialized in property casualty insurance. CINF has a 6.26% dividend yield, but lost -16.72% since the beginning of this year. The company has a dividend payout ratio of 96%. The stock has a market cap of $4.31B and a P/E ratio of 14.67. Jean-Marie Eveillard’s First Eagle holds the largest CINF position among the 300+ funds we are tracking.

Leggett & Platt (NYSE:LEG): Leggett & Platt Inc. is a U.S. manufacturer that mainly produces home and office furnishing and industrial materials. LEG has a 5.84% dividend yield but lost -13.71% since the beginning of this year. LEG has a dividend payout ratio of 97%. The stock has a market cap of $2.84B and a P/E ratio of 16.86. Steve Heinz’s Lansdowne Partners holds more than $50 Million of LEG.

Consolidated Edison Inc. (NYSE:ED): Consolidated Edison Inc. is an energy company providing electric, gas and steam utility services in the United States. ED has a 4.41% dividend yield and returned 13.53% since the beginning of this year. The dividend payout ratio of the company is 70%. The stock has a market cap of $15.81B and a P/E ratio of 14.49. Michael Messner and Jim Simons are among ED investors.

Kimberly-Clark Corp. (NYSE:KMB): Kimberly-Clark Corp. is a U.S. corporation that produces paper-based personal care products. KMB has a 4.27% dividend yield and returned 6.30% since the beginning of this year. The dividend payout ratio of KMB is 60%. The stock has a market cap of $25.85B and a P/E ratio of 15.60. Ric Dillon’s Diamond Hill had the largest position in KMB among the 300+ funds we are tracking (check out Ric Dillon’s top stock picks).

Abbott Laboratories (NYSE:ABT): Abbott Laboratories is a global health care company. ABT has a 3.93% dividend yield and returned 4.87% since the beginning of this year. The dividend payout ratio of the stock is 46%. ABT has a market cap of $78.06B and a P/E ratio of 15.34. Ken Fisher holds more than $400 Million of ABT.

Clorox Co. (NYSE:CLX): Clorox Co. is a global company providing chemical and food products worldwide. CLX has a 3.74% dividend yield and returned 3.85% since the beginning of this year. CLX has a 61% dividend payout ratio. The stock has a market cap of $8.91B and a P/E ratio of 31.99. Carl Icahn’s Icahn Capital had $700 Million in CLX at the end of March.

Johnson & Johnson (NYSE:JNJ): Johnson & Johnson is a U.S. company providing consumer healthcare and pharmaceutical products worldwide. JNJ has a 3.61% dividend yield and returned 3.93% since the beginning of this year. The dividend payout ratio of the company is 48%. The stock has a market cap of $176.10B and a P/E ratio of 15.37. Warren Buffett holds more than $2 Billion of JNJ. Jim Simons, Ric Dillon, Ken Fisher and Bill Miller are also among JNJ investors.

Procter & Gamble (NYSE:PG): Procter & Gamble is a global company providing a wide variety of consumer goods worldwide. PG has a 3.45% dividend yield but lost -3.12% since the beginning of this year. PG has a 53% dividend payout ratio. The stock has a market cap of $169.45B and a P/E ratio of 15.69. Warren Buffett has the largest position in PG. Phill Gross, Ken Fisher, Ric Dillon and D.E. Shaw also have large PG positions in their portfolios.

AFLAC Inc. (NYSE:AFL): AFLAC Inc. is a U.S. company providing supplemental insurance services. AFL has a 3.39% dividend yield but lost -36.14% since the beginning of this year. The dividend payout ratio of the company is 22%. The stock has a market cap of $17.51B and a P/E ratio of 9.81. Bill Miller had nearly $200 Million in AFL at the end of March 2011.

Bemis Co Inc. (NYSE:BMS): Bemis Co Inc. is a U.S. company supplying flexible and pressure sensitive packaging products in the United States. BMS has a 3.32% dividend yield but lost -9.43% since the beginning of this year. BMS has a 47% dividend payout ratio. The stock has a market cap of $3.12B and a P/E ratio of 14.96. Chuck Royce and Jim Simons are among BMS investors.

PepsiCo Inc. (NYSE:PEP): PepsiCo Inc. is a multinational corporation providing non-alcoholic beverages worldwide. PEP has a 3.27% dividend yield but lost -1.97% since the beginning of this year. The dividend payout ratio of PEP is 50%. The stock has a market cap of $102.27B and a P/E ratio of 16.48. Boykin Curry, Bill Miller and Ric Dillon are prominent PEP investors.

PPG Industries Inc. (NYSE:PPG): PPG Industries Inc. is an American manufacturer providing coatings and specialty products to construction, industrial and transportation industries worldwide. PPG has a 3.24% dividend yield but lost -14.56% since the beginning of this year. The dividend payout ratio of PPG is 44%. The stock has a market cap of $11.86B and a P/E ratio of 11.88. Ken Fisher holds more than $600 Million of PPG (check out Ken Fisher’s top stock picks).

Emerson Electric Co. (NYSE:EMR): Emerson Electric Co. is a global conglomerate providing a wide range of engineering and technology products and related services. EMR has a 3.21% dividend yield but lost -23.39% since the beginning of this year. The dividend payout ratio of EMR is 51%. The stock has a market cap of $34.17B and a P/E ratio of 15.25. Ken Fisher holds more than $250 million of EMR.

Automatic Data Processing Inc. (NASDAQ:ADP): Automatic Data Processing Inc. is one of the leading providers of integrated computing services in the world. ADP has a 3.10% dividend yield and returned 1.71% since the beginning of this year. The dividend payout ratio of ADP is 57%. The stock has a market cap of $23.91B and a P/E ratio of 19.06. Jean-Marie Eveillard’s First Eagle invested more than $150 Million in ADP.

Air Products & Chemicals Inc. (NYSE:APD): Air Products & Chemicals Inc. is a U.S. company providing chemical products to various industries. APD has a 3.02% dividend yield but lost -14.44% since the beginning of this year. The dividend payout ratio of the stock is 46%. APD has a market cap of $17.38B and a P/E ratio of 15.30. Phill Gross and Ric Dillon are the most prominent APD investors.

Stanley Black & Decker Inc. (NYSE:SWK): Stanley Black & Decker Inc. is an American manufacturer that provides security products and tools worldwide. SWK has a 2.89% dividend yield but lost -14.20% since the beginning of this year. The dividend payout ratio of the stock is 42%. SWK has a market cap of $10.22B and a P/E ratio of 16.87. Jean Marie Eveillard, John W. Rogers and Lee Ainslie are the most prominent SWK investors.

Lowe's Companies Inc. (NYSE:LOW): Lowe's Companies Inc. is a large home improvement store chain operating primarily in the United States, Canada and Mexico. LOW has a 2.86% dividend yield but lost -20.76% since the beginning of this year. The dividend payout ratio of the stock is 39%. LOW has a market cap of $26.17B and a P/E ratio of 13.58. Jason Capello, Jonathan Jacobson and Ken Griffin hold more than $200M of LOW.

McDonald's Corp. (NYSE:MCD): McDonald's Corp. is a large fast-food chain operating worldwide. MCD has a 2.85% dividend yield and gained 13.29% since the beginning of this year. The dividend payout ratio of MCD is 53%. The stock has a market cap of $90.28B and a P/E ratio of 13.58. 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 .



Disclosure: I am long CTL.

Source: Top 20 High Yielding Dividend Aristocrats