"One way to build an inflation hedge into your investment cash ?ows is to focus on stocks that are likely to boost their dividends on a regular basis," explains dividend specialist
Chuck Carlson
In his The DRIP Investor, he notes, "Since dividends are paid with cold cash, they can't be faked. Either you pay the dividend or you don't. They can't be some ?gment of accounting magic." Here, he looks at three favorite blue chips with strong dividend records.
"The math is simple, but compelling. If your dividend stream can at least keep pace with in?ation — and hopefully exceed the in?ation rate — your real spending power can be maintained or even increased over time.
"When a company makes a commitment to pay the dividend, the company is saying that it is con?dent that it will be able to continue to pay this commitment to shareholders.
"And when a company increases its dividend, the ?rm is saying that it believes the company's future is strong enough to support an increase in shareholder cash ?ows.
"The three stocks profiled each meet the following criteria:
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All have yields of at least 2.2%.
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All have increased dividends every year for at least the last ?ve years.
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All have 5-year annual dividend growth of at least 8%.
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All have Overall Quadrix® scores in the top quintile (above 80) in our Quadrix universe. Quadrix is my ?rm's proprietary stock-ranking system that scores more than 4,000 stocks based on more than 100 different variables, such as Value, Quality, and Performance.
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All have direct-purchase plans whereby any investor may buy shares directly, the first share and every share.
"Aflac (NYSE: AFL), the insurance company, has an especially impressive record of dividend increases spanning more than a quarter century.
"The stock has come through a very tough patch for ?nancials and should be among the sector's leaders going forward. DRIP investors note that Aflac has a very user-friendly DRIP. Minimum initial investment is $1,000. There are no fees on the buy side.
"Medtronic (NYSE: MDT), a leader in medical-technology equipment, is another with an impressive dividend-growth record. Dividends have increased every year since the company initiated a dividend in 1977.
"Health-care stocks continue to feel investor uncertainty as a result of the looming health-care reform bill. Still, Medtronic offers a quality play in the ?eld, and the company's dividend-growth record is a bonus.
"The last stock I'll mention here is Colgate-Palmolive (NYSE: CL). The ?rm has paid a dividend every year since 1895 and has increased its dividend in each of the last 46 years.
"Colgate-Palmolive's direct-purchase plan has a minimum initial investment of $500. There is a one-time enrollment fee of $10. Purchase fees are $2.50."
