10 Dividend Champions For The Next 10 Years (Part 1)

Includes: JNJ, KO, MSFT, PG, WM
by: Bill Maurer

Everyone wants some income in their portfolio, but with fixed income rates so low right now, that asset class does not seem viable to many. The best way to get some value in your portfolio seems to be in high-quality dividend stocks, and my focus today is on 10 of these names. My criteria is simple. The stocks must have increased or maintained their dividend over the past four years. Also, since I am focusing on the next 10 years, each must have a current yield above the current 10-year U.S. treasury, currently yielding around 1.91%.

In this article, I will focus on the first set of five, and will continue the series later this week. For each, I will include a table that shows dividends paid per year over the past four as well as the average unadjusted daily closing price for the stock. This also will allow me to give you the average yield the stock had for that year.

The first name I will focus on is Microsoft (NASDAQ:MSFT). Microsoft has steadily increased its dividend over the past few years.

Microsoft 2008 2009 2010 2011
Dividends Paid $0.46 $0.52 $0.55 $0.68
Average Price $26.65 $22.98 $27.06 $26.05
Average Yield 1.73% 2.26% 2.03% 2.61%

Microsoft increased its dividend from 16 cents a quarter to 20 in late 2011, which means that the company will pay 80 cents this year without another increase. Given the company's financial flexibility, including about $60 billion of cash and investments on its balance sheet currently, I would not be surprised if Microsoft increases it again, perhaps to 22 or 23 cents a quarter. Microsoft currently yields about 2.5%, and is also buying back billions in stock currently. A lot of investors have called this a dead stock in recent years, but the name is up more than 20% already in 2012, and there is still plenty of room for growth. Microsoft's Bing search is expanding its market share, and Microsoft's gaming division led by Xbox is doing quite well. The company has also recently completed its Skype acquisition.

My next champion is Johnson & Johnson (NYSE:JNJ), the healthcare company that has been a dividend favorite among investors for several decades. Johnson and Johnson has increased its dividend nicely over the past few years. Since its stock has not risen tremendously, the yield has also increased as well.

Johnson and Johnson 2008 2009 2010 2011
Dividends Paid $1.80 $1.93 $2.11 $2.25
Average Price $64.91 $57.79 $62.16 $63.56
Average Yield 2.77% 3.34% 3.39% 3.54%

The company is currently paying 57 cents a share each quarter in dividends, but in recent years, has raised that dividend for the May payout. The stock currently yields 3.5%, but if we get a dividend raise, that number is likely to go up. The company has been buying back stock at times, although not in the quantities that Microsoft is.

Procter & Gamble (NYSE:PG), one of the top consumer names, seems like a good third choice, doesn't it? The company has solidly increased its dividend, which is up more than 30% in just the past few years.

Procter and Gamble 2008 2009 2010 2011
Dividends Paid $1.55 $1.72 $1.89 $2.06
Average Price $66.14 $54.47 $62.13 $63.73
Average Yield 2.34% 3.16% 3.03% 3.23%

The company has raised its dividend by an average of 17 cents per year in the past few years, which is why this name has always been an investor favorite. Like Johnson and Johnson, P&G usually raises its dividend during the Spring, so if it increases it this year, the April payout will see a higher amount. The company has rallied recently, and is now close to 52-week highs, meaning the yield is down to about 3.1%. But that is still better than a lot of other names out there, and well above Treasury rates. P&G has been known for its great dividend payout history, which is something that I expect to continue for years to come.

The fourth name I'll focus on is Waste Management (NYSE:WM). Somebody has to get rid of our garbage, and this company does it more than anyone else. The company also pays a nice dividend, which has steadily increased in recent years.

Waste Management 2008 2009 2010 2011
Dividends Paid $1.08 $1.16 $1.26 $1.36
Average Price $33.66 $29.27 $34.17 $34.98
Average Yield 3.21% 3.96% 3.69% 3.89%

The company's yield has increased in recent years, and currently stands near 3.8%. Of the five names I'll cover in this article, it has the highest yield. Like the previous two, this name has generally increased its dividend in the first or second quarter, and they just raised the dividend on Tuesday afternoon. The new dividend will be 35.5 cents per quarter, which means a yearly payout of $1.42. As of Tuesday's close, this means the name is now paying more than 4%.

For the final name in this article, I'll focus on the beverage giant, Coca-Cola (NYSE:KO). Over the past few years, the dividend has increased at a decent clip, and so has the stock price. The yield has stayed flat from 2008 to 2011, but I think investors are fine with that, given the rise in stock price.

Coca-Cola 2008 2009 2010 2011
Dividends Paid $1.52 $1.64 $1.76 $1.88
Average Price $53.81 $48.76 $56.54 $66.65
Average Yield 2.82% 3.36% 3.11% 2.82%

Coke is doing much better than rival Pepsi (NYSE:
PEP) right now, and analysts have a much higher rating on Coke (1.8 out of 5) than Pepsi (2.3 out of 5 - lower number is a stronger buy). Like many of the others, Coke usually increases its dividend in the first quarter, meaning that it could raise it again for the March payout. The yield is currently at 2.97%, which means that any raise will get it back above 3%. Given recent history, Coke should break the $2 annual payout either this year or next. That will be a welcome sign for value investors.

Continue to Part 2 >>

Disclosure: Author long WM at time of writing, but looking to exit position sometime this week.