Investing In S&P 500 Dividend Aristocrats, Part II

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Includes: FDO, GWW, HRL, JNJ, KMB, LEG, LOW, MCD, MKC, PBI, PEP, PG, PPG, SHW, SIAL, SPGI, SWK, TGT, VFC, WBA, WMT
by: Dividendinvestr

<< Return to Part I

Recently we compiled a list of 21 stocks form the S&P 500 Dividend Aristocrats Index and showed that they have beaten the SPY since the beginning of this year. The S&P 500 Dividend Aristocrats Index tracks the large cap S&P 500 companies that have increased their dividends at least 25 consecutive years. Since the beginning of 2011, 42 stocks in the S&P 500 Dividend Aristocrats Index returned -3.27%, vs. -7.10% loss for the SPY. (Market data sourced from Standard & Poors and Fidelity.)

We believe investors should be cautious of the upcoming inflationary environment and play more defensively in the near future. We think the Dividend Aristocrats that are able to increase dividends may provide protection against inflation with a better risk-return combination.

Below, we compiled the second part of the list of stocks from the S&P 500 Dividend Aristocrats Index and showed how they have performed this year:

Dividend Yield

Dividend Payout Ratio 2010

YTD Return

Pitney Bowes Inc

(NYSE:PBI)

7.72%

66%

-16.8%

Leggett & Platt

(NYSE:LEG)

5.55%

97%

-7.9%

Kimberly-Clark

(NYSE:KMB)

4.01%

60%

14.3%

Johnson & Johnson

(NYSE:JNJ)

3.60%

48%

5.0%

Procter & Gamble

(NYSE:PG)

3.35%

51%

-0.1%

PepsiCo Inc

(NYSE:PEP)

3.32%

50%

-2.9%

PPG Industries Inc

(NYSE:PPG)

3.19%

44%

-13.2%

Stanley Black & Decker

(NYSE:SWK)

3.19%

42%

-21.7%

McDonald's Corp

(NYSE:MCD)

3.18%

61%

17.3%

Wal-Mart Stores

(NYSE:WMT)

2.85%

36%

-2.9%

Lowe's Cos

(NYSE:LOW)

2.82%

39%

-19.6%

Walgreen Co

(WAG)

2.75%

41%

-14.7%

McCormick & Co

(NYSE:MKC)

2.42%

42%

0.52%

Target Corp

(NYSE:TGT)

2.40%

31%

-15.5%

McGraw-Hill Cos

(MHP)

2.32%

37%

20.6%

VF Corp

(NYSE:VFC)

1.99%

39%

49.4%

Hormel Foods Corp

(NYSE:HRL)

1.91%

34%

5.5%

Sherwin-Williams Co

(NYSE:SHW)

1.91%

33%

-7.5%

Grainger, W.W. Inc

(NYSE:GWW)

1.71%

39%

13.4%

Family Dollar Stores

(NYSE:FDO)

1.35%

27%

8.4%

Sigma-Aldrich Corp

(NASDAQ:SIAL)

1.15%

22%

-4.9%

AVERAGE

2.99%

45%

0.31%

SPY

-7.10%

Click to enlarge

Since the beginning of this year, the average YTD return of these 21 stocks was 0.31% vs. -7.10% for the SPY. All these stocks except LEG have dividend payout ratios of less than 70%. The average dividend payout ratio of those stocks is 45%, and the average dividend yield is 2.99%.

Here are the 10 highest-dividend-yielding stocks on our list:

Pitney Bowes Inc is an American company that provides packaging and mailing hardware, software and related services worldwide. PBI has a 7.72% dividend yield but lost -16.80% since the beginning of this year. The stock has a market cap of $3.87B and a P/E ratio of 11.08.

Leggett & Platt is a US manufacturer that mainly produces home and office furnishing and industrial materials. LEG has a 5.55% dividend yield but lost -7.89% since the beginning of this year. The stock has a market cap of $2.86B and a P/E ratio of 16.97. Paul Ruddock’s Lansdowne Partners holds the largest LEG position among the 300-plus funds we are tracking.

Kimberly-Clark is an American corporation producing paper-based personal care products. KMB has a 4.01% dividend yield and returned 14.53% since the beginning of this year. The stock has a market cap of $27.89B and a P/E ratio of 16.83. Ric Dillon had more than $60 million in KMB at the end of June 2011.

Johnson & Johnson is a US company providing consumer health care and pharmaceutical products worldwide. JNJ has a 3.60% dividend yield and returned 5.01% since the beginning of this year. The stock has a market cap of $174.89B and a P/E ratio of 15.27. Warren Buffett holds more than $2 billion of JNJ.

Procter & Gamble is a large multinational company providing a wide variety of consumer goods worldwide. PG has a 3.35% dividend yield and returned -0.14% since the beginning of this year. The stock has a market cap of $172.38B and a P/E ratio of 15.96. Warren Buffett has the largest position in PG.

PepsiCo Inc. is a multinational corporation providing non-alcoholic beverages worldwide. PEP has a 3.32% dividend yield but lost -2.94% since the beginning of this year. The stock has a market cap of $98.80B and a P/E ratio of 15.93. Bill Miller is among the well-known PEP investors.

PPG Industries Inc. is an American manufacturer providing coatings and speciality products to construction, industrial and transportation industries worldwide. PPG has a 3.19% dividend yield but lost -13.24% since the beginning of this year. The stock has a market cap of $11.26B and a P/E ratio of 11.28. Ken Fisher had nearly $600 million in PPG at the end of June.

Stanley Black & Decker is a diversified global provider of hand tools, power tools and related accessories, mechanical access solutions and electronic security solutions, engineered fastening systems, and more. SWK has a 3.19% dividend yield and returned -21.69% since the beginning of this year. The stock has a market cap of $8.66B and a P/E ratio of 14.29. John W. Rogers holds more than $120 million of SWK.

McDonald's Corp is a large fast-food chain operating worldwide. MCD has a 3.18% dividend yield and returned 17.26% since the beginning of this year. The stock has a market cap of $90.83B and a P/E ratio of 17.78. Jim Simons has a large stake in MCD.

Wal-Mart Stores is a multinational corporation operating retail store chains worldwide. WMT has a 2.85% dividend yield but lost -2.86% since the beginning of this year. The stock has a market cap of $176.85B and a P/E ratio of 11.58. Warren Buffett had more than $2B of WMT at the end of June 2011.

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