Reynolds American (RAI)
Dividend Yield: 5%
1-Year Total Return: 26%
Reynolds American (RAI) is having a fine time on price alone, rising 20% over the past 52 weeks. That beats the S&P 500 by a couple of percentage points. Add in this tobacco company’s dividend, however, and the outperformance widens to something special, beating the broader market by more than 5 points.
Perhaps the most attractive aspect of RAI stock is the way it almost relentlessly hikes its dividend. It will pay $2.68 a share in dividends this year, up from $2.48 in 2013. And that was up from $2.33 paid in 2012. Indeed, the RAI stock dividend has grown 182% in the past 10 years.
At the same time, RAI is forecast to have strong earnings growth this year and beyond. Wall Street expects earnings per share (EPS) to expand 6% in the current fiscal year, and by more than 8% in 2015. That should be more than enough growth and income to drive more total return outperformance this year and beyond.