The stock market began 2012 with an outstanding performance. But after the Dow had an excellent quarter, Q2 has given up most of those gains. Long term capital gains have been basic for successful investing, but a lackluster record in recent years has called that idea into question. Many portfolios limped along with modest growth. Dividends, however, largely continued, providing a source of comfort to investors.
Lower stock prices in Q2 have raised yields, making quality stocks even more attractive, especially for long-term investors. 12 of the best Dividend Aristocrats were selected to ride through difficult times in investing. All have increased dividends annually for at least the last 25 years (many have streaks of 30-40 years or more). These streaks have become more significant after the brutal recession 3 years ago. During the financial meltdown, some of the biggest companies with streaks of over 30 years were ended. The remaining Dividend Aristocrats felt the same effects of the recession but were able to extend their streaks.
The Dow gained only 8% since January 1 2000. But growing dividends improved results in portfolios. Below are 6 Dividend Aristocrats which have had modest growth in the last 10 years (similar or better than the Dow) with the advantage of raising annual dividends. Their yields are much higher than most stocks, many investment grade bonds and Treasuries. Valuations are modest with P/Es around 15X. These stocks are for investors looking for attractive yields and higher income from dividend growth:
Emerson Electric (EMR)
Genuine Parts (GPC)
For investors with more aggressive goals, 6 Dividend Aristocrats with records of substantial growth in recent years were selected. Most have at least tripled over 10 years and are up nicely in the last five years. BF-B (known for Jack Daniels and Southern Comfort) is the one exception, its appreciation was just shy of triple in the last 10 years but it has had a respectable gain in the last 5 years. By way of comparison, the Dow fell 6% in the last 5 years and is up 32% in the last 10 years (starting from a low base under 10,000). Current yields are not as high but expectations are for substantial capital appreciation:
VF Corp (VFC)
WW Grainger (GWW)
CR Bard (BCR)
Patient investors with long-term horizons will be interested in these stocks. Current income and growth of dividends are more reliable no matter what happens with ups and downs in the stock market. These thoughts are more relevant after the dismal stock performance in Q2. Dependable dividends combined with annual increases provide comfort for investors. In the last 5 years, beginning before the recession hit, all 12 of these companies have had good dividend growth. Dividends for the 2 weakest, RPM & SHW, were raised over 20%. Most of the others increased dividends more than 40%.
In late 2011, many forecasts for 2012 were being revised upward. They didn't work out. The Dow has dropped 800 from its 2012 highs. Consistency in raising dividends does not get enough respect during trying financial times (like the last 5 years). Managements of Dividend Aristocrats are committed to reward shareholders with total return, dividends and capital appreciation. Dividends are important in growing capital and investment income for investors to afford a higher standard of living in later life.
Disclosure: I am long VFC.