Boost Your Dividend Stream With These Stocks
Shas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
An investment portfolio with high dividend yield stocks is a good strategy to ensure a steady income stream. However, there are several criteria which I generally keep in mind while selecting a stock candidate for my portfolio. While a healthy dividend yield is a good stepping stone, I also carefully analyze that high yield does not come at the cost of low capital appreciation. There is no point gaining a dividend if you are losing equally or more through the decline in market price of the security. Apart from this, I also pay attention to dividend growth. This I do to ensure that the regular income stream is guarded against inflationary trends.
Walgreen Company (NYSE: WAG):
This drugstore retail chain company offers an attractive dividend yield of 2.8 percent and the stock has also appreciated 20 percent in the past 52 weeks. But this is not all, the company is also known for providing a good dividend growth rate as in the past year, the dividend has grown at a rate of more than 18 percent per annum. Walgreen also has an enviable record of paying dividends through the past 321 quarters. The company is also growing on other fronts as it introduced its new brand of juices and smoothies ‘Up Market.’ The brand is designed to be placed in the premium category. The move will also help the company grow beyond the drugstore category. Following its long established divided track record, Walgreen also recently declared its first dividend for 2013. The first dividend of the year will be payable on March 12, 2013 and the record date for this purpose has been set at February 15. Its latest dividend at $0.275 per share is higher than the $0.225 per share it paid in the past two quarters. Thus, the stock provides a good regular income stream with healthy potential for capital appreciation, making it an ideal candidate for inclusion in any value oriented portfolio.
AT&T (NYSE: T):
This telecom stalwart is an industry leader that offers good returns to its investors. AT&T provides a 5 percent dividend yield and the company has an equally impressive dividend payment record. The stock also grew more than 10 percent in the last one year. If you are going to rely upon your equity portfolio for generating regular dividend income then you should look at the stocks with the ability to sustain their high dividend payments. AT&T perfectly fits the bill as it has robust cash reserves. The telecommunication company is right on track, producing healthy free cash flow quarter after quarter, ensuring that it will be able to continue with its generous dividend payment record. Apart from healthy capital appreciation and attractive dividend payouts, the company is also on its way to buy back about 300 million of its shares in the coming future, offering its investors yet another way to share the strong financials of the company. With about a 4.8 percent dividend growth rate, this stock is needed to be included in dividend portfolio.
The Clorox Company (NYSE: CLX):
The company’s current annual payout stands at $2.56 and its dividend yield is at 3.36 percent. Clorox has already announced its first quarterly dividend for 2013 at $0.64. The company has healthy market capitalization of $9.9 billion and its stock trades at P/E ratio of 18.52. While its P/E ratio makes it a relatively expensive stock, it paid its investors well by growing 12 percent in the past 52 weeks. The company has more than doubled its dividend in the last 5 years, making its 5 years dividend growth rate above 12 percent per annum. Clorox’s current payout ratio stands at 58 percent and thus it has reasonable upside to growth in dividend payments. The company is also on an upward trajectory with regard to its EPS, providing a good indication that the company is going to retain its dividend track record in the near future. Clorox’s stable business growth makes it an attractive stock to ensure regular dividend income.
As illustrated above, it is not difficult to find the stocks which will pass the stringent criterion for inclusion in a stable dividend portfolio. However, I ensure that I do not pick any stock based on any one single ratio. For sustained performance, the stock should be able to prove its worth on various fronts. So, don’t get sidelined by just good dividend yields.
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