10 Challengers in the Dividend Sweet Spot

Mar. 14, 2011 11:07 AM ETRSG, LMT, INTC, DRI, FLO, HAS, ACU, CPB, AUBN, KHC14 Comments
The Dividend Pig profile picture
The Dividend Pig

A dividend yield of 2-5% is often considered the "sweet spot" of dividend growth investing. It is within these boundaries that the right combination of dividend growth and yield is found; the magic mix that will lead to substantial accumulation of wealth over time.

Here, many of the world's top dividend paying companies live. Names like Coca-Cola (KO), Johnson & Johnson (JNJ), Procter & Gamble (PG), and McDonald's (MCD) all consistently maintain yields between 2-5%. This yield window helps protect the stock price from large dips, as too low a price would send the yield through the roof, and the stock would get snatched up by smart investors. If, for example, KO was ever yielding 6-8%, I'm pretty sure Warren Buffett would buy the whole company.

The object is to get into these businesses early, so as to be one of the blessed shareholders who will experience 25+ years of consistent dividend growth. A simple way to accomplish this is to pay attention to the Dividend Challengers, a subset of the Dividend Champions list. These companies have five to nine years of consistent dividend increases, and many are great companies with wide moats. By choosing wisely, we can ride the wave of increasing dividends well into retirement.

Here are 10 Dividend Challenger companies with dividend yields between 2-5% and strong dividend growth.

1. Auburn National Bancorp (AUBN) is a bank holding company controlling AuburnBank (the Bank), an Alabama state member bank. The ocmpany's business is conducted primarily through the Bank and its subsidiaries.
5-year dividend growth rate - 6.1%
Years dividend growth - 9
Yield - 4.02%

2. Campbell Soup Co. (CPB), together with its subsidiaries, is a manufacturer and marketer of convenience food products. The company operates in four segments: U.S. Soup, Sauces and Beverages; Baking and Snacking; International Soup, Sauces and Beverages; and North America Foodservice.

This article was written by

The Dividend Pig profile picture
I am an individual investor that invests in dividend paying stocks. I look for solid businesses that consistently generate profit, and share that money with investors through growing dividends.

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