I have learned over many years of investing that one of the most important factors for a dividend paying stock is not only the current yield, but also whether the company has been willing to increase its dividend over time. An increase in the dividend signals strength in the company's cash flow and a commitment to returning capital to its investors. Here is a list of five stocks with a healthy record of dividend increases that I believe are worth looking into and could bolster the return of your portfolio.
Chevron Corporation (CVX)
Chevron, with a 3.2% yield, has a track record of raising its dividend annually at a rate of 8.5%. Currently, Chevron is $10 below its 52-week high and $6 below its 50-day moving average. At a 7.5 PE ratio, the stock is relatively cheap for its sector and should have some room to run. This company has a good balance sheet and is continuing to pay down debt. In the fuel industry, the dividend is safe and is likely to continue the trend of increasing year over year. In the current environment, crude oil prices and gas prices are more likely to increase than come down. This stock is worth taking a look at this price level. Anything in the low 100s should be considered a good price.
Eaton Corporation (ETN)
Eaton Corporation currently has a 3.3% dividend yield and has a tradition of raising its dividend at an annual rate of 11.3%. Zacks on Monday added Eaton to its list of best dividend stock for secure profits. It is currently trading $3 lower than its 50-day moving average and trades at a 11.8 P/E ratio. It also raised its earnings guidance by $0.05 to account for an acquisition of a hose manufacturer in Turkey. Its earnings have been growing since the recession in 2008 and its financial outlook looks to be strong.
General Dynamics (GD)
General Dynamics is a defense company and it currently has a 2.9% yield. Its tradition of boosting its dividend regularly is well documented at 11.3% per year. Despite the reduction in US government spending, this company continues to be strong. This stock trades at a P/E of 10.1 and currently has a backlog of $57 billion worth of orders. The company has sufficient cash flow to continue its dividend and return value to investors.
Microsoft, mostly known for being a growth stock, has been quietly raising its dividend. It has raised their dividend at an average annual rate of 11%. With Windows 8 looming on the horizon, Microsoft continues to dominate in many software markets. It has been dedicated to returning some of its cash to investors. It only trades at an 11.1 PE and looks to have more room to run, while continuing to increase dividends.
Wal-mart stores (WMT)
Wal-mart is no stranger to anybody, but it has a track record of having consistent value, while increasing its dividend at an annual rate of 15%. The company's yield is a healthy 2.7% and continues its dominance in the retail sector. It is trading near its 52-week high and I don't see it losing customers any time soon. This company, because of its size and reputation, can offer a variety of products (just about anything) for the best prices. Because of this, it tends to do well in tough economic situations.
Please be sure to do research before investing.
Disclosure: I am long ETN.