"Dividend investing has been a minefield this year; according to Standard & Poor’s, there were 138 dividend cuts or suspensions in the third quarter of this year -- up 557% from the year-earlier quarter," reports Chuck Carlson.
In his The DRIP Investor, he asks, "Enter the Dividend Aristocrats. So named by S&P, Dividend Aristocrats are those companies in the S&P 500 that have boosted their dividends annually for at least the last 25 years."
"Not surprisingly, roughly two-thirds of the dividend cuts in the third quarter were in the ?nancial sector. The dividend destruction in the quarter took more than $22 billion out of the pockets of investors, according to S&P.
"Interestingly, despite the negative press on dividends, there were 346 companies that boosted their dividends in the quarter.
"Looking forward, it is difficult to see the dividend numbers improving anytime soon. To be sure, even companies with long histories of dividend increases are not sure things when it comes to dividend increases.
"To address that point, I took S&P’s list of Dividend Aristocrats and pared it down to stocks that offer dividend reinvestment plans, with many allowing investors to make even their initial purchase of stock directly.
"In addition, I looked for stocks that have Quadrix® Overall and Financial Strength scores of at least 50. Quadrix is my ?rm’s stock-rating system that scores more than 5,000 stocks based on more than 100 different variables.
"It’s worth noting that several of the Dividend Aristocrats in the table are offering attractive yields. One such company is Emerson Electric (NYSE: EMR). The manufacturer of electronics and electrical equipment yields 4%.
"The company recently boosted its dividend 10% to a quarterly rate of $0.33 per share. The increase represented the 52nd consecutive year the company has boosted its dividend. To be sure, the recession will impinge on the company’s earnings over the next 12-18 months.
"Still, the ?rm is expected to earn around $3 per share for ?scal 2009 ending in September, providing ample coverage of the current annual dividend rate of $1.32 per share. The stock has been weak in line with most stocks but offers an attractive dividend play for long-term investors.
"Another interesting stock on the list is Dover (NYSE: DOV). The company is a diversi?ed concern with businesses in industrial, engineered systems, ?uid management, and electronic technologies markets.
"Despite a sluggish economy, the ?rm managed to grow net income 8% in the latest quarter, beating the consensus earnings estimate.
"The company’s diversi?ed business portfolio is helping stem weakness in any one area. Still, the consensus earnings estimate re?ects expectations for an 8% decline in pershare pro?ts in 2009.
"Based on the 2009 estimate of $3.33, Dover trades at just 7 times the estimate — an attractive valuation for such a quality company.
"The current quarterly dividend of $0.25 per share appears well covered by earnings. Yielding more than 4%, Dover offers an attractive total-return play for dividend-hungry investors.
"One ?nal stock worth mentioning is McDonald’s (NYSE: MCD). The company is bucking strong economic headwinds by putting up solid same-store sales numbers. Indeed, worldwide same-store sales jumped 8% in October, including an especially impressive 5% jump in the U.S.
"The stock has held up quite well relative to the overall market. Enhancing appeal is the stock’s yield of 3.8%. I would expect these shares to continue to outperform the overall market over the next 12 months."
