Investor2. Yes, failing to increase the dividend or just the rumor of that happening will likely crater many of the stocks where people believe they are supported by investors who are in them primarily for that dividend and its growth.
And if interest rates rise strongly and quickly, it'll take time for supposedly powerful/dominant companies to increase prices enough to enable them to make their dividend yields more competitive with investments based on interest rates. And they may not even be able to do this -- raise prices or maintain their revenue base. And the individual business risk is there. (Walmart and others, for example, going to more in-house brands might harm P&G's future.)
The S&P Aristocrats list which are the S&P 500 stocks with 25 or more consecutive earnings growth has the issue of maintaining those div. increases. For 2010, there were a couple of adds, but 10 were removed, giving a total of 43 (if I counted right). It's been quite a year, and those 10, for whatever reasons, just could not continue with their increases.
The 2010 Aristocrats are:
finance.yahoo.com
I don't see any I like as great buys now. I am holding shares in several though; don't reinvest the dividends back into those same stocks now; and am reluctant to make investment buys of any shares of these companies at current prices. XOM if it touches lows maybe. KMB on my watch list for a starting buy if it drops more. Maybe might reinvest ABT dividends in ABT shares, although I feel I already have an outsize position in that company. Grocer SVU which made the 2010 list when it was published in Dec. has cut its div this year, so I suspect it'll be off the next list. SVU stock has come down, and might be a buy now. I'm not sure I want to tackle it though.
I just used aristocrats as a reference point for somebody looking for big US-based companies with good history of increasing dividends. There are other such good companies not on the S&P, that could be considered as well. NJR, mentioned earlier by Steve Felix, looks pretty good to me with its 15 year history of div. increases.
I agree though, it's important to pick the right stocks; the wrong stocks can hurt you. I say though if somebody picked a few stocks-- a small package, some from the Aristocrat list, some from other lists of good and long-time dividend payers-- and if the person isn't going to be buying/selling/trading stocks and has no interest in investing but would like to save for the future, would like to diversify out of cd's or bank savings accounts or treasury bonds or funds, and has 20-40 years ahead of them before retirement, then buying and reinvesting and holding on to these kinds of stocks seems to be a decent way to go. Jmo, of course. |
