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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 also 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 over the last few years. 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 20 large-cap US stocks that achieved consistent dividend growth and paid high current dividend yields. The market data are sourced from Fidelity. All companies in this list have increased their dividend payments every year since 2006. These stocks have market capitalizations above $20 billion and annualized dividend yields between 2% and 3%.

Dividend Yield

5-Year Average Div Growth

YTD Return

Emerson Electric Co.

(NYSE:EMR)

2.96%

9.17%

-16.96%

General Dynamics Corp.

(NYSE:GD)

2.93%

15.36%

-8.00%

Automatic Data Processing

(NASDAQ:ADP)

2.88%

14.26%

9.62%

Lowe's Companies Inc.

(NYSE:LOW)

2.81%

22.87%

-19.34%

Medtronic Inc.

(NYSE:MDT)

2.77%

17.13%

-3.71%

Wal-Mart Stores Inc.

(NYSE:WMT)

2.74%

16.86%

0.70%

McDonald's Corp.

(NYSE:MCD)

2.70%

29.50%

20.43%

Coca Cola Co.

(NYSE:KO)

2.67%

8.68%

8.67%

3M Co.

(NYSE:MMM)

2.65%

3.64%

-2.04%

United Technologies Corp.

(NYSE:UTX)

2.59%

12.62%

-4.04%

Colgate Palmolive Co.

(NYSE:CL)

2.58%

12.63%

14.26%

Walgreen Co.

(NYSE:WAG)

2.56%

23.76%

-8.33%

Norfolk Southern Group

(NYSE:NSC)

2.54%

19.03%

9.66%

Exxon Mobil Corp.

(NYSE:XOM)

2.54%

7.99%

3.02%

Target Corp.

(NYSE:TGT)

2.32%

20.11%

-12.70%

ACE Ltd.

(NYSE:ACE)

2.23%

8.29%

4.85%

Baxter International Inc.

(NYSE:BAX)

2.22%

16.33%

11.83%

CSX Corp.

(NYSE:CSX)

2.19%

29.20%

3.30%

Occidental Petroleum Corp.

(NYSE:OXY)

2.12%

20.64%

-10.78%

Praxair Inc.

(NYSE:PX)

2.03%

14.87%

4.20%

AVERAGE

16.15%

0.23%

Since 2006, these 20 large-cap S&P 500 stocks have increased their cash dividends every year, and their five-year average dividend growth is 16.15%. Since the beginning of this year, the average return of these 20 stocks was 0.23% vs. -1.90% for the SPY. Three stocks in this group – MCD, CL and BAX – provided double-digit returns in 2011.

Here are the top 10 highest-dividend-yielding, large cap S&P 500 stocks on our list:

Emerson Electric Co. (EMR) is a global conglomerate providing a wide range of engineering and technology products and related services. EMR has a 2.96% dividend yield but lost -16.96% since the beginning of this year. In the past 5 years, EMR increased its dividend payments annually by 9.17%. The stock has a market cap of $34.67B and P/E ratio of 15.47. Ken Fisher holds more than $250 million of EMR.

General Dynamics Corp. (GD) is a major American defense conglomerate. GD has a 2.93% dividend yield but lost -8.00% since the beginning of this year. In the past 5 years, GD increased its dividend payments annually by 15.36%. The stock has a market cap of $23.18B and P/E ratio of 9.10. James A. Star’s Longview Asset Management holds a massive $2.5 billion of GD.

Automatic Data Processing Inc. (ADP) is one of the leading providers of integrated computing services in the world. ADP has a 2.88% dividend yield and gained 9.62% since the beginning of this year. In the past 5 years, ADP increased its dividend payments annually by 14.26%. The stock has a market cap of $24.50 billion and P/E ratio of 19.93. Jean-Marie Eveillard’s First Eagle invested more than $150 Million in ADP.

Lowe's Companies Inc. (LOW) is a large home improvement store chain operating primarily in the United States, Canada and Mexico. LOW has a 2.81% dividend yield but lost -19.34% since the beginning of this year. In the past 5 years, LOW increased its dividend payments annually by 22.87%. The stock has a market cap of $25.12B and P/E ratio of 13.47. Both Jason Capello and Jonathan Jacobson hold more than $200 million of LOW.

Medtronic Inc. (MDT) is a large medical technology company mainly providing device-based medical therapies worldwide. MDT has a 2.77% dividend yield but lost -3.71% since the beginning of this year. In the past 5 years, MDT increased its dividend payments annually by 17.13%. The stock has a market cap of $37.21B and P/E ratio of 12.22. Ken Fisher holds more than $300 Million of MDT. Ric Dillon, John Paulson and Bill Miller are other prominent MDT investors.

Wal-Mart Stores Inc. (WMT) is a global company operating retail store chains worldwide. WMT has a 2.74% dividend yield and returned 0.70% since the beginning of this year. In the past 5 years, WMT increased its dividend payments annually by 16.86%. The stock has a market cap of $184.71B and P/E ratio of 12.01. Warren Buffett holds more than $2 Billion in WMT.

Mc Donald's Corp. (MCD) is a large fast-food chain operating worldwide. MCD has a 2.70% dividend yield and returned 20.43% since the beginning of this year. In the past 5 years, MCD increased its dividend payments annually by 29.50%. The stock has a market cap of $93.28B and P/E ratio of 18.26. Jim Simons has the largest MCD position among the 300-plus funds we are tracking.

Coca Cola Co. (KO) is one of the largest non-alcoholic beverages providers in the world. KO has a 2.67% dividend yield and returned 8.67% since the beginning of this year. In the past 5 years, KO increased its dividend payments annually by 8.68%. The stock has a market cap of $161.76B and P/E ratio of 13.14. Warren Buffett has the largest holding in KO.

3M Co. (MMM) is a large American conglomerate providing a wide range of diversified technology products worldwide. MMM has a 2.65% dividend yield and lost -2.04% since the beginning of this year. In the past 5 years, MMM increased its dividend payments annually by 3.64%. The stock has a market cap of $58.88B and P/E ratio of 14.06. Jean-Marie Eveillard had more than $600 Million in MMM at the end of June 2011.

United Technologies Corp. (UTX) is a large US conglomerate providing aerospace technology products and related services worldwide. UTX has a 2.59% dividend yield and lost -4.04% since the beginning of this year. In the past 5 years, UTX increased its dividend payments annually by 12.62%. The stock has a market cap of $67.47B and P/E ratio of 14.36. Ken Fisher had more than $500 Million in UTX at the end of June 2011.

Source: 20 Consistent, High-Yielding Dividend Picks For Defensive Investors