Finding Top Dividend Stocks That Beat the Stock Market

Buying and holding dividend stocks, over long periods of time, beats the market. Research proves it. First, dividend stocks as a group, outperform in bull and bear markets and beat the S&P 500, by 1.6% on average according to Ned Davis Research. But you can do even better (than a 1.6% beat) by focusing your stock selection only on dividend stocks that also have a low payout ratio. In a study by Credit Suisse, tracking investment returns from 1990-2008, the universe of high yielding, low payout dividend stocks, nearly doubled the returns of the S&P 500.

Today, the average dividend yield of S&P 500 stocks is 2.07%, and the average payout ratio is 51%. Not many stocks are better than average in both categories, which is why Wal-Mart (NYSE: WMT), J.M. Smucker (NYSE: SJM), and Kellogg (NYSE: K), look interesting. The three have have high dividend yields of 2.5%, 2.6%, and 3.3% respectively, and they have a track record of keeping their payout below 51% as well.

Source: Motley Fool

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