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The Federal Reserve announced that it intends to keep interest rates low for at least two years. This policy is hard on investors seeking income, especially in retirement accounts. Gone are the days when idle money could earn 3-5% while waiting for better buying opportunities. Traditional investments which were useful for earning income have lost their appeal. Government securities, investment grade bonds and bank deposits have meager yields which are unsatisfactory for retirement accounts. But dividends from quality companies can provide attractive yields. Better yet are Dividend Aristocrats which have track records of increasing dividends for at least 25 consecutive years.

Twelve of the most attractive Dividend Aristocrats, with yields generally above 3%, are selected below. For retirement investments held in personal accounts, dividends have a tax advantage because they are taxed at lower rates. Dividend Aristocrats kept increasing dividends through recessions when lesser companies ended their streaks (some even cut dividends).

12 Dividend Aristocrats for Retirement Investing

Company Price Dividend Yield
Leggett Platt (NYSE:LEG) $22.29 $1.12 5.0%
Kimberley-Clark (NYSE:KMB) $71.90 $2.80 3.9%
Sysco (NYSE:SYY) $29.31 $1.08 3.7%
Abbott Labs (NYSE:ABT) $56.29 $2.04 3.6%
Johnson & Johnson (NYSE:JNJ) $65.10 $2.28 3.5%
RPM (NYSE:RPM) $25.27 $0.86 3.4%
Pesico (NYSE:PEP) $63.13 $2.06 3.3%
Bemis (NYSE:BMS) $31.24 $1.00 3.3%
Procter & Gamble (NYSE:PG) $66.42 $2.10 3.2%
Emerson Eletric (NYSE:EMR) $51.07 $1.60 3.1%
Automated Data Proc (NASDAQ:ADP) $53.80 $1.58 2.9%
Genuine Parts (NYSE:GPC) $62.27 $1.80 2.9%

My favorite in the group is LEG with its high yield. LEG manufactures components for residential furniture and bedding; office furniture components; carpet underlay; and automotive seat support and lumbar systems.

The dividend was raised substantially to $1 three years ago and since then annual increases have been a modest 4 cents because the recession hurt earnings. Businesses that weren't part of long term plans were sold and some of that money was used for an aggressive stock repurchase program (last year, 10 million shares were purchased). The company uses a new measure to evaluate its performance for shareholders, Total Shareholder Return (TSR). TSR for the three-year period ending December 31, 2011, ranked LEG in the top 38% of the S&P 500 companies, just below the company goal to be in the top third.

LEG is guiding 2012 sales of $3.6-3.8 billion (a modest increase) and assuming the economy will improve modestly, EPS should be $1.20-1.40. Analysts are forecasting $1.60 next year (which should bring a larger dividend increase). In January, LEG completed a $188 million acquisition of Western Pneumatic Tube (the first significant acquisition since 2007).

A higher level of risk accompanies high yields and LEG may not suitable for some investors. Other companies with lower yields, and without a substantial business risk, may be of interest to those who are more risk averse. All 12 companies have financial strength, allowing numerous dividend increases over the years. Almost all have streaks of 40 years or more. PG, EMR and GPC are leaders, having increased dividends for 56 years.

ABT just increased the quarterly dividend from 48 cents to 51 cents (41 year streak). The stock has been strong in recent months because this old pharmaceutical company will split into two companies later this year, hoping investors will give the two companies a higher market value. SYY markets food and related products to the food-service industry primarily in the U.S. and Canada. Higher food costs have squeezed margins. But after a sluggish earnings under $2 this year, analysts are forecasting EPS of $2.41 next year (41 year streak).

JNJ will extend its streak to half a century when dividend is increased in April. PG paid annual dividends since incorporation in 1890 and has increased the dividend for 56 consecutive years at an annual compound average rate of 9.5%. If that rate is continued, the dividend will grow 150% to about $5 in 10 years.

These companies are committed to rewarding shareholders with total return from capital appreciation and dividends. However capital appreciation since the market crash in 2000 has been spotty. Dow started 2000 at 11,497 and just closed at 12,984. That's up 13% with only meager dividends along the way. Earning capital appreciation in the last 12 years has been difficult. Meanwhile dividends have generally been paid on a regular basis and for these 12 companies, annual dividend increases have become a way of life. For extra financial strength, JNJ and ADP are two of the four industrial companies which still have the coveted AAA credit rating from S&P (the U.S. lost it last year).

In an unreliable stock market, it feels good to receive dividends which are expected to rise before and during retirement. Higher dividends will come from growing earnings which should lead to rising stock prices, the primary goal for successful investing of retirement funds.

Source: 12 Stocks With Growing Dividends For Succesful Retirement Investing