I have a fondness for high-yield stocks, which has guided much of my investment thinking. The best are Dividend Aristocrats because they have raised annual dividends for a minimum of the last 25 years. Only 51 companies in the S&P 500 qualify along with a handful of other companies. The highest yielding stocks are above 4%, but such yields imply a small degree of risk. The next group with yields of 3-4% blends income and growth. They get a lot of attention.
However the stocks with 2-3% yields tend to be ignored because those yields are viewed as ho-hum. They include some of the finest companies and most have streaks of 40 years of more for raising annual dividends. Some of the finest corporate names are listed below. The table shows stock prices, dividends, yields, the percentage dividend increases from 2007 and dividend streaks (number of years annual dividends have been increased):
Stanley Works (SKW)
Exxon Mobil (NYSE:XOM)
Illinois Tool Works (ITS)
(1) Stanley Black & Decker is a diversified global provider of hand tools, power tools and related accessories, mechanical access solutions and electronic security solutions, and engineered fastening systems.
(2) PepsiCo produces snacks, foods, and beverages, which include Pepsi-Cola Diet Pepsi, Lay's, Doritos, Tropicana, Gatorade and Quaker. Its products are sold worldwide.
(3) Automatic Data Processing is one of the world's largest providers of business outsourcing services that include human resource, payroll, tax and benefits administration services from a single source.
(4) Coca-Cola has the best-known brand name in the world with sales in every country except Cuba and North Korea. This global company is organized into 6 divisions: Eurasia & Africa, Europe, Latin America, North America, Pacific and Bottling Investments
(5) Archer-Daniels-Midland is a world leader of soy meal and oil, corn, wheat for bakery products and cocoa for chocolate products. The company also makes specialty food ingredients.
(6) Exxon Mobil is the largest energy company on earth with the second-largest market cap. In recent years XOM has been investing more aggressively in gas-related energy.
(7) Illinois Tool Works is a 100-year old industrial manufacturer of consumables and specialty equipment serving markets around the globe, with a significant presence in emerging markets. More than half of revenue comes from outside of the U.S.
(8) 3M has 6 business segments: Consumer and Office Business Supplying (including Scotch Tape), Display and Graphics Business Drawing, Electro and Communications Business, Healthcare Business, Industrial and Transportation Business and Safety, Security and Protection Services Business.
(9) Dover Corporation is a diversified global manufacturer providing products and services in 4 major operating segments: Communication Technologies, Energy, Engineered Systems, and Printing and Identification.
(10) Colgate-Palmolive is a leading consumer products company, focused on Oral Care, Personal Care, Home Care and Pet Nutrition. Its products are sold in over 200 countries under such names as Colgate, Palmolive, Ajax and Hill's Science
The stock market has changed significantly in the last 12 years. The Dow Jones Industrials rose a modest 14% since the start of 2000 while Nasdaq fell 24%. Capital appreciation is no longer as reliable as in the past. While some companies have done well, a great many, including some of the best-known growth companies, have had only mediocre stock performances (or worse).
But dividends have continued for quality companies. Dividend Aristocrats kept raising dividends, even through the worst of times. The stream of dividends should be extended along with increases (typically more than token amounts). Their stock prices have done well in recent years and should do well in the future as these companies benefit from global economic growth. Increasing earnings lead to dividend increases, the key for higher stock prices. Reinvested dividends enhance portfolio gains. Investing in these companies can bring favorable results.