by Jeff Reeves | November 21, 2011 9:16 am
“Dividend aristocrats” are publicly traded stocks with a rich history of rewarding shareholders with bigger and bigger payouts. These companies have increased their dividends every year for at least 25 consecutive years, proving not just that they have income potential but that their payouts will continue to grow as the company profits.
In recent years, dividend investors have been burned by big-time disappointments at companies like General Electric (NYSE:GE), which slashed its payout 68% during the financial crisis, and financial stocks like Bank of America (NYSE:BAC) and Citigroup (NYSE:C), which now offer a meager penny per quarter after their government bailouts and persistent lending woes.
These events make the importance of a sustainable and growing dividend very clear, and the current turmoil in the market means these investments are more important than ever.
Here are 5 such dividend aristocrats investors may want to consider adding to their portfolios in anticipation of continued volatility ahead in 2012.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.
Health care spending on prescription drugs and other therapies is not a discretionary expense for millions of Americans – it’s a necessity. This has allowed for strong baseline sales at big pharma stocks such as Abbott Laboratories (NYSE:ABT). Like other drugmakers, Abbott faces patent expirations on some of its big names, but its powerhouse arthritis medication Humira doesn’t go off patent until 2016, and the company is currently working on spinning off its brand-name drug operations from its generic pharmaceuticals, diagnostic devices and nutritional operations. The move could insulate Abbott – and investors seem to like the look of things. The stock is up by double digits so far in 2011. ABT yields 3.6% and has paid dividends since 1926.
Warren Buffett recently made a splash by revealing that his Berkshire Hathaway (NYSE:BRK.A) bought into tech stock IBM (NYSE:IBM) last quarter, taking up a 5.5% stake in Big Blue. But if you really want to buy like Buffett, consider Coca-Cola (NYSE:KO). Buffett and Berkshire owns about 200 million shares of KO’s roughly 2.3 billion shares outstanding, for almost 9% of the total. This consumer staple is a king of branding and marketing, and has seen revenue jump from $28.9 billion in fiscal 2007 to $35.1 billion in fiscal 2010 — a 21% increase. Even more impressive is that earnings per share soared from $2.57 to $5.06, almost doubling. KO stock yields 2.8% right now.
Discount retail is in high favor with consumers amid tight spending and a troubled job market. Family Dollar (NYSE:FDO) is a great example of this trend. The stock is up 14% year to date, compared with a flat market. Revenues and profits have all increased year-over-year annually since fiscal 2007, showing growth even amid broader economic difficulties. On top of that, FDO stock has a decent 1.2% payout that, a history of paying dividends since 1976 and a strong record of increasing payouts, too.
Amid weak consumer spending on big-ticket items, another area of strength has been consumer staples such as toiletries, basic foodstuffs and household goods. Kimberly Clark (NYSE:KMB) makes Kleenex tissues, Huggies diapers and other paper products. Folks keep filling their pantries with these items despite the tough times, and as a result KMB stock is up 11% and has seen eight consecutive quarters of year-over-year revenue increases. With a 4% dividend, this is definitely a stock to watch.
Big-box retailer Target (NYSE:TGT) has seen shares slide about 11% in 2011, but the company itself is faring better than you may think amid a tough consumer environment. The retailer has chalked up eight consecutive quarters of year-over-year revenue growth and another eight consecutive quarters of year-over-year earnings increases. Most recently, in its Q3 earnings report, Target’s profit rose as same-store sales grew and bad-debt expenses declined — meaning TGT stock could be one the upswing in 2012. As a hedge, Target yields a decent 2.2%, and has paid dividends since 1965.
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