Post on 26-Jun-2015
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Hi, My names Aaron and I‘m with Dividend Stocks Research, and today
were reviewing our recently published article…
Dividend stocks are a great investment… but could they be some
of the greatest investments EVER? When it comes to dividend stocks, as
an investor consistency matters.
You want a consistent track record of dividends not just being paid, but
also dividend growth.
When this dividend growth takes place quarter after quarter and year after year, a company solidifies its position, and earns a well-deserved
reputation.
Dividend Aristocrats are Dividend stocks that are in the S&P 500 and
have increased their dividend payouts for 25 years or more… to
say it’s an elite group is an understatement.
Investors tend to think of dividend stocks as value stocks, and in many
cases this is accurate. But the Aristocrats can include a handful of growth stocks, which we don’t often
associate with consistent and growing dividends.
The Dividend Aristocrats typically deliver a total return, including both
dividends and price appreciation, that outperforms the broader
market.
The consistent performance and pattern of a company that reliably pays a growing dividend allows a
stock to become what is known as a Dividend Aristocrat.
When you think about the shifts we’ve seen in the market over the
past 25 years, this is quite an accomplishment. It is why these
companies command premium pricing, with P/E ratios on the high
side.
It is also why they tend to fall into just a handful of different industries.
The Aristocrats are in ten different industries.
The top 3 categories are: •Consumer Staples•Industrials•Health Care
When investors think about safe and reliable dividend stocks, they usually think about financial
stocks or utility stock
But as we have seen over the past decade, both these industries have been shaken. On the 2013 lineup of
Aristocrats, firms such as Wells Fargo, JP Morgan Chase, and
Citigroup are missing.
Some of the stocks are household names. Coke, Pepsi, Wal-Mart and
McDonald’s are Aristocrats.
But many of these companies aren’t so well known.
Pentair Ltd. (PNR)
In the business of valves, fittings, pumps, and filters. It is a Swiss
company with extensive operations here in the U.S.
Leggett & Platt (LEG)
This company manufactures springs, casters, frames for seats and beds, and other engineered components.
C.R. Bard (BCR)
This health care company manufactures and markets medical
supplies such as catheters and vascular grafts.
Abbott Laboratories(ABT)
Companies check in and check out on the S&P 500 lineup of dividend
aristocrats. Mostly, they check out. One newcomer to the list, which made its debut in 2013, is Abbott
Laboratories (ABT).
EMR has been an Aristocrat since 1957. 3M (MMM) has been on the lineup since 1959 and Proctor and
Gamble (PG) has been an Aristocrat since 1957.
The market plunge in 2008 rattled more than a few Aristocrats. 24
stocks fell from the list. 12 of them were in the financial sector.
List of 12 Stocks1. Bank of America (BAC) 2. Comerica (CMA) 3. Fifth Third Bancorp (FITB) 4. KeyCorp (KEY) 5. Progressive (PGR) 6. Regions Financial (RF) 7. BB&T (BBT) 8. General Electric (GE) 9. Legg Mason (LM) 10. M&T Bank (MTB) 11. State Street (STT) 12. U.S. Bancorp (USB)
When a stock is stripped of Aristocrat status, does this present
an investor with an attractive buying opportunity?
Because the reputation of the stock has been damaged, does this mean that the underlying value has been
damaged as well?Like most things in the world of
investing, the answer is, “It depends.”
General Electric (GE)
Most investors consider General Electric (GE) to be a well-run
company with solid operations and a promising future. While it has lost
its status as an Aristocrat, it has not lost its ability to pay dividends.
General Electric (GE)
But not every fallen Aristocrat is a GE. Some companies that stumble and are forced to cut a dividend are
experiencing something more ominous that a cyclical downtown.
Pitney Bowes (PBI)
Take a look at Pitney Bowes (PBI), which was shown to the exit in
2013. The firm was founded in 1920 and had been an Aristocrat for
years.On Apr. 30, 2013, the firm slashed its dividend payment by 50%.The
stock took an immediate hit, instantly plunging 10%.
Pitney Bowes(PBI)
Even though the stock has crawled back from its 2013 lows, this is
clearly a firm that is in trouble. It is literally watching its business
vanish.
Pitney Bowes(PBI)
As fewer pieces of snail mail go through the postal system because
of email, and as the demand for metered mail slides, Pitney Bowes is
witnessing the evaporation of its core business. It remains to be seen
if its attempts to offer digital solutions will prove profitable.
Proctor and Gamble(PG)
Whether it’s Tide detergent or a Gillette razor, most of us have a
Procter & Gamble product or two in the house.
Proctor and Gamble(PG)
And most investors who depend on reliable dividend payments have some P&G in their portfolio. P&G
has been paying dividends since the company was launched in 1890. The firm has been increasing its dividend every year since 1956.
Proctor and Gamble(PG)
The P&G dividend yield is 3.15% and the payout ratio is 61.1%.
P&G has recently been one of the higher yielding Aristocrats. The
yields for the Aristocrats are typically in the 1-3% range.
Proctor and Gamble(PG)
High yields are difficult to achieve, and even more difficult to maintain, so it is rare to see an Aristocrat with
a yield higher than 4%.
You can spend your time looking for individual Dividend
Aristocrats to invest in… or you can take a short cut…
Investors who are looking for a simple way to invest in the
Aristocrats can buy shares in the State Street High Yield Dividend
Aristocrats (SDY)
This ETF tracks the S&P High Yield Dividend Aristocrats Index. It
follows roughly 60 stocks, all high-quality companies where the
dividend has been increased for at least 25 years in a row.
A similar ETF is the ProShares S&P 500 Aristocrats ETF (NOBL).
So when it comes to dividend investing, consider some of the aristocrats, they could be the greatest investments ever!
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