The stock market stagnation caused by the most recent financial crisis has encouraged investors to look at dividend payouts as a relatively reliable and competitive source of income. As Mark Hulbert of MarketWatch wrote last September, "Believe it or not, the stock and bond markets are behaving in a way that, with only one exception at the depths of the 2008-2009 credit crisis, they have not since 1958—53 years ago: The stock market’s dividend yield is now above the interest rate on the 10-year Treasury note."
According to Tyler from DividendMoney.com, an investment in the S&P 500 index would have netted investors zilch in the time between 1996 and 2009, the bottom of the market correction, except for any dividends they had been paid. He adds, "[the dividend] process can be uneventful at times. And no, I’m not going to get rich overnight. However, I also won’t go broke overnight and I am compounding my future cash flow with every dividend payment that is reinvested."
Moreover, dividend payouts have additional value for long-term investors. Motley Fool's Dan Caplinger explains, "If you're a dividend investor who's in it for the long haul, what your stock pays you today isn't nearly as important as what it'll pay you in the years to come." The key concept behind this assertion is the "Effective Yield" of an investment, which is the dividend yield calculated using your original purchase price. Caplinger provides this example:
"For instance, look at McDonald's (MCD). Five years ago, it paid an annual dividend of $1 per share, and with shares trading in the low $40s, investors got a fair but not jaw-dropping dividend yield of around 2.5%. Since then, though, the company has raised its payouts every year, with the most recent hike pushing the annual dividend rate to $2.80. At today's share price above $90, that still represents only a 3% current yield. But if you look at Selena's effective yields, $2.80 on an original purchase price just above $40 equates to almost 7%."
While hunting for stocks with good dividend yields may not be as glam as investing in what might be the next success story, the benefits of investing in a Dividend Champion can significantly outweigh the benefits of investing in non-dividend stocks over the long run. A Dividend Champion is a company that has consistently raised dividend payouts every year for the past 25 years or more. A list of these companies is compiled by The DRiP Investing Resource Center.
Interested in finding a reliable source of dividend payments that could boost your effective dividend yields over a long-term investment? Start with this list of the ten Dividend Champions that have boosted their dividend payments annually for the most consecutive years.
List sorted according to number of consecutive years dividends payouts have increased.
Use the Turbo Chart to Compare the Performance of the First Two Companies in the List to the S&P 500:
1. Diebold Inc. (DBD, Earnings, Analysts, Financials): Provides integrated self-service delivery and security systems and services primarily to the financial, commercial, government, and retail markets worldwide. Market cap at $2.22B. Dividend yield at 3.23%. Dividends have increased yearly for the past 59 years.
2. American States Water (AWR, Earnings, Analysts, Financials): Provides water, electric, and contracted services in the United States. Market cap at $772.51M. Dividend yield at 2.73%. Dividends have increased yearly for the past 57 years.
3. Dover Corp. (DOV, Earnings, Analysts, Financials): Manufactures and sells industrial products and components, and consumables. Market cap at $9.4B. Dividend yield at 2.44%. Dividends have increased yearly for the past 56 years.
4. Genuine Parts Co. (GPC, Earnings, Analysts, Financials): Distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, Canada, and Mexico. Market cap at $9.53B. Dividend yield at 3.21%. Dividends have increased yearly for the past 56 years.
5. Northwest Natural Gas (NWN, Earnings, Analysts, Financials): Distributes natural gas primarily in Oregon, Washington, and California. Market cap at $1.26B. Dividend yield at 3.74%. Dividends have increased yearly for the past 56 years.
6. Parker-Hannifin Corp. (PH, Earnings, Analysts, Financials): Manufactures fluid power systems, electromechanical controls, and related components. Market cap at $11.02B. Dividend yield at 2.22%. Dividends have increased yearly for the past 56 years.
7. Procter & Gamble Co. (PG, Earnings, Analysts, Financials): Provides consumer packaged goods in the United States and internationally. Market cap at $177.59B. Dividend yield at 3.44%. Dividends have increased yearly for the past 56 years.
8. Emerson Electric (EMR, Earnings, Analysts, Financials): Operates as a diversified manufacturing and technology company. Market cap at $32.8B. Dividend yield at 3.54%. Dividends have increased yearly for the past 55 years.
9. 3M Company (MMM, Earnings, Analysts, Financials): Operates as a diversified technology company worldwide. Market cap at $61.13B. Dividend yield at 2.65%. Dividends have increased yearly for the past 54 years.
10. Vectren Corp. (VVC, Earnings, Analysts, Financials): Provides energy delivery services to residential, commercial, and industrial and other customers in Indiana and west central Ohio. Market cap at $2.43B. Dividend yield at 4.75%. Dividends have increased yearly for the past 52 years.
(Written by Andrew Dominguez)
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Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Diebold Inc. (DBD, Chart, Download SEC Filings)
- American States Water (AWR, Chart, Download SEC Filings)
- Dover Corp. (DOV, Chart, Download SEC Filings)
- Genuine Parts Co. (GPC, Chart, Download SEC Filings)
- Northwest Natural Gas (NWN, Chart, Download SEC Filings)
- Parker-Hannifin Corp. (PH, Chart, Download SEC Filings)
- Procter & Gamble Co. (PG, Chart, Download SEC Filings)
- Emerson Electric (EMR, Chart, Download SEC Filings)
- 3M Company (MMM, Chart, Download SEC Filings)
- Vectren Corp. (VVC, Chart, Download SEC Filings)
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