Stock market averages have reached their highest levels in four years, even though economies around the world are struggling. China, the No. 2 economy, is still growing, but at an unsatisfactory rate of roughly 7%. Europe is in recession while it tries to prop up its failing economies. America has a host of economic problems caused by anemic growth in 2012. The Federal Reserve just announced a new program to buy more mortgage debts with the hope of lowering the unacceptable high unemployment rate. A major factor holding back economic growth in the U.S. is the fiscal cliff. If Congress does not agree on a program to balance the budget, there will be an increase in the present tax rates and major budget cuts (starting with defense) on January 1.
But Congress is doing nothing, other than babbling. Inaction will continue until after the November election at a minimum. By December 25, it might come up with a compromise to extend some tax benefits and limited budget cuts. If not, the U.S. economy will be in serious trouble and heading for another recession.
The Dow Jones Industrials is at the highest level since the September 2008 market crash. After such gains, it is easy to forget that longer term track records of capital appreciation have not been impressive since the heady days of 2000. Dow is up only 18% since the beginning of 2000. But dividends have generally been paid.
Fifty-one S&P 500 Dividend Aristocrats (along with a few companies outside the S&P 500) have raised annual dividends for a minimum of the last 25 years. Double Dividend Aristocrats have been raising annual dividends for at least half a century (while there were numerous recessions). A major recession in 1973-4 caused the Dow to plunge 40%. In the early 1980s, the economy had double digit unemployment and inflation at the same time. Around 1990 and 2000 there were severe recessions. And the brutal recession of 2008-2009, still fresh in everybody's minds, caused many of the most famous Dividend Aristocrats to reduce dividends, ending long term streaks. But strong Double Dividend Aristocrats extended their streaks, and that financial strength will allow them to continue increasing dividends through what could be another recession. Additionally, increases have been significant. Most have raised dividends at least 50% in the last five years (MMM has the lowest increase of only 23%).
Below are the eight best Double Dividend Aristocrats:
- Johnson & Johnson (NYSE:JNJ) is the largest health care company in the world, and became a Double Dividend Aristocrat this year. The $68.60 stock yields 3.6%.
- Procter & Gamble (NYSE:PG) consumer packaged goods are purchased more than 40 billion times year across the globe. Dividends have increased annually for the last 56 years at a compounded average rate of 9.5%. The $69.26 stock yields 3.2%.
- Genuine Parts (NYSE:GPC) distributes automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials in the U.S., Canada and Mexico. Net income has grown from $738,000 in 1948 to $565 million last year. The $62.34 stock yields 3.2%.
- Emerson Electric (NYSE:EMR) is a diversified worldwide technology company that supplies engineering services and solutions to industrial, commercial and consumer markets. The dividend has increased at a compound annual rate of 11% since 1956. The $50.56 stock yields 3.2%.
- Coca-Cola (NYSE:KO) products are sold in every country except North Korea and Cuba. The largest provider of non-alcoholic beverages is split into sparkling beverages (carbonated) and still beverages (Minute Maid, Dasani, vitaminwater, etc.). The $38.52 stock yields 2.6%.
- 3M (NYSE:MMM) is a diversified technology company with a global presence in: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics; and Electro and Communications. The $93.63 stock yields 2.5%.
- Dover Corp (NYSE:DOV) is a diversified global manufacturer focused on innovative equipment and components, specialty systems and support services through four major operating segments. The $60.58 stock yields 2.3%.
- Parker Hannifin (NYSE:PH) is the No. 1 global diversified manufacturer of motion and control technologies and systems, providing precision engineered solutions for mobile, industrial and aerospace markets. The $85.93 stock yields 1.9%.
What distinguishes these companies from other stocks is that they have uncommon track records of growth for at least half a century. With growing turmoil in global financial markets, it is comforting to know that these investments will keep growing dividends. And dividend growth is a key ingredient for higher stock prices. Growing dividends feel good, especially when stocks sell off.