Ask The Expert: How Can 'Dividend Aristocrat' Stocks Help You Beat The Market?
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Since the financial crisis of 2008, many investors have lost interest in growthand prefer to focus on capable of generating solid dividends. Today's question looks at an strategy that focuses on the very best dividend-paying .
Question: I've been hearing a
--Frankie, Tucumcari, New Mexico
#-ad_banner-#To be a "," a company must be in the S&P 500, have a aristocrat of at least $3 billion and must have boosted its dividend -- by a little or a -- for 25 years straight. In just the past year, Chevron (NYSE: CVX), Cardinal Health (NYSE: CAH) and Pentair (NYSE: PNR) have been welcomed into the club. On the flip side, the financial crisis of 2008 caused many longstanding members of the club -- most notably the big banks -- to drop off as dividends were slashed to preserve .
Of the 500 companies in the dividend yield of these aristocrats is 2.8%, compared to the 1.8% offered by the other 458 companies in the S&P 500., 42 (or 8%) make the grade. The average
[InvestingAnswers Feature: The 5 Best Dividend ] For A Retiree's Portfolio
S&P found that these companies income streams, they also tend to see their share prices rise in value at a respectable clip. In fact, S&P's researchers studied data from the past 90 years and found that dividend payments accounted for about one third of the wealth that these stocks have generated, with the other two thirds of the return captured by rising share prices.up a unique twist. Not only do they generate steadily rising
A basket of these stocks has delivered a total return (dividends plus gains) of 6.3% annually over the past five years, which is three times the gains posted by the broader S&P 500. In fact, the S&P 500 has outperformed the S&P 500 over three-, five-, 10- and 20-year periods on a total return .price
Offense And Defense
Part of the charm of owning stocks that sport rising dividend yields is their broad-based appeal in buy-and-hold . That means they're less subject to the wild price swings that other stocks have generated in recent years.or markets. In a , these stocks tend to rise in tandem with the broader averages. And when the slumps, investors are inclined to sell other stocks and hang on to their dividend-paying stocks as
And whereas other dividend-focused strategies tend to tieto a particular industry such as utilities, (REITs) or energy Master (MLPs), the are represented by many industries. This removes the risk of your portfolio being tied to just a narrow slice of the .
So should you invest in aristocrat stocks? The answer is a qualified yes. These companies are surely tried-and-true winners, but they've also become especially popular in recent years as the relative yields of fixed incomelike and have slumped toward zero.
Eventually, those types of term. So the answer to your question really depends on how long you plan to own them.begin to better yields, which draw some attention away from dividend-paying stocks. In effect, these aristocrats great long-term opportunity but, as with many stocks, might slump in value in the short
One final thought: The stocks that qualify as don't the most robust dividend yields. Indeed, many stocks such as AT&T (NYSE: T) and Duke Energy (NYSE: DUK) in the 4% to 6% range -- roughly twice the of the typical aristocrat. Yet unlike the higher yielders that possess more limited growth prospects and may boost their dividends only modestly, the appear to be in a very good position to steadily boost their dividends at a faster pace. Own them now and you may be stunned to see what kinds of dividends they are generating a decade or two in the future.typically
P.S.: If you want to know about one of the most effective dividend strategies around, then you have to find out about "The Dividend Trifecta." Simply Go here to learn more..., it's a three-part approach to dividends that multiplies the effectiveness of every dollar you invest. The plan is specifically engineered for people who want to retire sooner or for those who would like to get a steady stream of extra income now.
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