Stocks With Dependable Dividend Increases

Last year was a double win for dividend fans. The S&P Dividend Aristocrats, a group of companies that have steadily boosted payments for at least 25 years, returned more than 19%, besting the broad-market 500 index by four percentage points. Also, three firms that were dropped from the Aristocrats in December were replaced immediately by three newcomers, halting what was beginning to look like a threat to the species.

Investors still have plenty of reasons to favor dividend payers in general and Aristocrats in particular. A dollar invested in the S&P 500 index in 1930 was worth $49 by the end of 2009 without dividends and $1,259 with them. Over the past five years, the Aristocrats have returned an average of 5% a year, versus 1% for the S&P 500. Unfortunately, the strategy doesn't lend itself well to mimicry by index funds, in part because the short list of stocks would make it difficult for funds to meet diversification requirements.

Source: SmartMoney

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