Dividends That Improve with Time

Looking for some payout plays? S&P highlights companies that have raised their dividends annually for 40 years

By Michael Kaye, CFA

Though long-term investors have long considered quality dividend-paying stocks to be a cornerstone of a solid portfolio, these equities have gained added allure with the passage of the Bush Administration's economic stimulus package in May. That plan includes a reduction in the tax rate on payouts to shareholders. And indeed, according to Standard & Poor's investing newsletter The Outlook, 2003 is turning out to be the best year for total dividend payments on the S&P 500-stock index since 1999.

It's clear that many investors clawed by the bear market have found the lure of a solid, regular dividend hard to resist. But wouldn't a steadily rising payout be even better?

LONG LOOK BACK.

  "Although there are no guarantees, companies that regularly increase dividends are a good bet to continue doing so and are ideal for long-term investors," note S&P's Joseph Lisanti and Joseph Tigue in their book The Dividend Rich Investor.

That's the idea behind this week's screen. We searched for stocks in the S&P 500 that have increased their dividends in each of the last 40 years. And while Lisanti and Tigue point out that stocks with low but increasing dividend yields are a better choice than those with high current dividend yields, these steady growers have an added kicker -- they each have a higher current yield than the S&P 500.

Our search yielded these six names:

Rising dividends, above-market payouts
Company/ticker S&P STARS Rank
3M Corp. (MMM ) 3
Coca-Cola (KO ) 4
Emerson Electric (EMR ) 2
Johnson & Johnson (JNJ ) 4
Procter & Gamble (PG ) 5
Teco Energy (TE ) 2

Kaye is a portfolio services analyst for Standard & Poor's

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