The Power Of Dividends

By Eric Fox | December 02, 2009 AAA

Dividends are an important part of the total investment return of a stock, yet many investors ignore this component and instead focus on searching for stocks that might have more of a chance of price appreciation. They would do wise to pay more attention to this attribute.

IN PICTURES: How To Make Your First $1 Million

There are plenty of stocks that are solid dividend payers with great yields, some of which are also household names. Some of these companies have been paying dividends for more than 100 years. Proctor & Gamble (NYSE:PG) has steadily paid out dividends since 1891, and has increased its dividend payout each year for the last 55 years. The current yield is just under 3%.

Long-Time Dividends
Proctor & Gamble sells many diversified consumer products so it isn't surprising that the company has paid out a rising dividend stream for so long. However, PPG Industries (NYSE:PPG) is in many businesses leveraged to the industrial economy, so it might shock some to know that the company has paid dividends since 1899. The stock has a current yield of 3.5% and has increased its payout for 37 consecutive years.

One company on the cusp of entering the century club is H.J. Heinz (NYSE:HNZ), which has been paying a dividend since 1911. The stock has a yield of 3.9%, and has a five-year average dividend growth rate of 8.8%.

Automatic Data Processing, Inc. (Nasdaq:ADP) has only been paying a dividend since 1974, but the company has raised that dividend for 33 straight years. The stock yields 3.2% and the company has grown its dividends at a 23% average rate over the last five years.

Recession Cuts
Of course, dividends don't also protect investors. General Electric (NYSE:GE) has been paying a dividend since 1899, but the company was forced to slash that dividend during the financial crisis and recession. General Electric cut its quarterly dividend from $0.31 to $0.10 back in February 2009, freeing up an extra $9 billion annually to help its capital. General Electric stock declined to a low of $5.75 per share during 2009, down about 85% from its peak.

If these 3-4% dividends seem too small to be bothered with, consider that if the stock market returns 8% annually on average over a long-term horizon, a dividend of this size is half that return.

The Bottom Line
Many well-known stocks have paid dividends for more than one hundred years, including during the financial crisis and recession. Investors should look for these to boost the total return of their portfolios. (Learn more about issues that can complicate dividends for investors in Dividend Facts You May Not Know.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

You May Also Like

Related Analysis
  1. Stock Analysis

    Agenus Jumps on Positive Data from Shingles Candidate - Analyst Blog

  2. Stock Analysis

    MetLife Tagged as SIFI: What it Means for Your Portfolio? - Analyst Blog

  3. Stock Analysis

    Paychex Q2 Earnings Beat Estimates, Reaffirms FY15 Outlook - Analyst Blog

  4. Stock Analysis

    ACE to Boost Personal Lines for Wealthy with Fireman's Fund - Analyst Blog

  5. Stock Analysis

    Seattle Genetics Initiates Phase Ib Study on Leukemia Drug - Analyst Blog

Trading Center