Investing in dividend stocks definitely has its advantages. Stocks with high dividend yields generally offer more downside risk protection than growth stocks. This is because the steady cash payouts these stocks provide give investors peace of mind when the going gets rough. So, dividend-paying stocks typically do not fall as fast or as far as high-flying growth stocks (that typically lack a regular dividend payout) when the market turns south.
Utility companies and industrial conglomerates are often placed in this category, but almost any large-cap company that has paid a sizable dividend consistently over the years can probably be counted on to continue doing so. If you are looking to beef up your portfolio with some dividend darlings, usually the best place to start hunting is with stocks that have paid out increasing dividends consistently over a period of years. Generally speaking, the longer a company has paid out a high dividend yield, the more likely it is to continue doing so in the future. (To learn more about the benefits of dividends, check out Dividends Still Look Good After All These Years and How Dividends Work For Investors.)
With that in mind, here are five investments with sizable current dividend yields that have a history of strong dividend growth, or at the very least consistent distributions:
|Company/Trust||Current Dividend Yield||Market Cap|
|Provident Energy Trust
|Data as of end of day July 29, 2008|
Hercules Technology Growth Capital
Based in California, the specialty finance company is a venture equity and debt provider. It supports entrepreneurial companies by facilitating access to public capital, experience and expertise to help them ultimately become leaders in their field. Hercules Tech's portfolio includes companies that focus on medical devices, computer hardware and software, networking systems and internet services, telecommunications, health care services, and bio-pharmaceuticals. As you can tell, it provides growth capital to a wide range of companies in various stages of development.
The shares haven't exactly been faring well. It's far off its 52-week high of $13.60, but that's not hardly a surprise, given the wreckage in the financial sector lately.
First Quarter Shows Signs of Life
Hercules Tech is coming off a decent first quarter. In the period ended March, net income came in at about $11 million, or 34 cents per share, which was marked improvement over the $6.3 million, 28 cents per share, it reported in the same period last year.
A pair of insiders seems impressed with the company. According to a Yahoo Finance Form 4 search Hercules, CEO Manuel Henriquez bought 5,500 shares between May 13 to June 10 in the range of $10.37 to $9.86 per share. Meanwhile, between May 14 to June 13, Allyn Woodward Jr., a director, bought 4,000 shares between $10.51 and $10.09 per share. Frankly, I think this shows a good deal of confidence in the company, and it certainly piques my interest.
At present street expectations figure the company will earn $1.18 per share this year and $1.38 per share next. This is enticing given that the shares can currently be bought for under $10. It also pays a healthy dividend of 34 cents per share, which was consistently 30 per share from December 2005 until February 2008. The current yield is an eye popping 14%.(To learn more about the compound nature of dividend returns, check out The Power of Dividend Growth.)
Dividends for the Long Haul
Despite the cliché, you certainly don't have to be a widow or an orphan to appreciate the staying power dividend-paying stocks can add to your portfolio over the long haul. Keep your eye on these high dividend-yielding stocks and share your opinion about them in the FREE Stock Picking Community.