The best dividend yield stock

Written by meryl baer
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The best dividend yield stock
Wachovia was one of many companies forced to cut its dividend during the 2008 financial crisis. (Chris Hondros/Getty Images News/Getty Images)

Dividend-yielding stocks present investors with two winning strategies: income and growth. The income can be reinvested in additional stock shares or other investments. Dividends are an important revenue component for individuals living on fixed incomes, such as retirees. High-yielding dividend stocks are a welcome addition to income, while the potential for growth in the way of stock price appreciation is crucial to future proceeds as individuals hope their income outpaces inflation.

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The 'Dividend Aristocrats'

Standard & Poor's publishes a list each year of what the firm calls "Dividend Aristocrats." These are what the company has determined to be the best dividend-paying stocks that year. Companies on the list must meet three conditions. The companies must have a minimum market cap of £1.9 billion, they must have a trading volume of at least £3 million to ensure liquidity, and they need a history of increasing dividends each year for the previous 25 years. The top 10 companies on the list as of April 19, 2011 are Becton, Dickinson & Company; VF Corporation; Cintas Corporation; W. W. Grainger, Inc.; Ecolab Inc.; C. R. Bard, Inc.; Johnson & Johnson; Coca Cola Company; Abbott Laboratories; and PPG Industries.

Additional Top Choices

The Motley Fool suggests Intel and Automatic Data Processing as high dividend-yielding choices. A lot of companies in the technology field do not pay dividends. Intel is an exception. The company increased its dividend each of the five years prior to 2010, resulting in a 26 per cent dividend increase. Automatic Data Processing has paid dividends since 1974. The company's five-year dividend payout as of 2010 was 21.52 per cent. The 20-year annualised growth rate for the stock as of 2010 was 12 per cent. Other companies with long dividend histories and attractive growth records include Archer Daniels Midland, Aflac, Lowe's, and Exxon Mobil.

Choosing High Dividend-Yielding Stocks

Choosing stocks is an unpredictable process. Investors want growth and capital appreciation while at the same time they do not want to lose a lot of money. Past performance is not necessarily indicative of future returns, but does provide a benchmark for evaluation. A company with a solid dividend payout history and steady growth is a good starting point for a portfolio holding. Many companies make attractive dividend payouts but may not have growth potential. The security might be a possibility for an investor seeking mainly income. The investor who is also in search of growth should look for dividends and growth capabilities. Companies that pay dividends demonstrate their commitment to their shareholders and their confidence in the future of the business.

Discovering High-Yield Stocks

A number of financial websites issue lists of high dividend-yielding stocks in addition to the Standard & Poor's Dividend Aristocrats. The site TopYields lists the 100 top dividend-yielding stocks on the New York Stock Exchange and a separate list of the top 100 on the London Stock Exchange. The Street publishes top dividend stocks in two categories: highest dividend payouts and highest yields. IndexArb records the dividend yields of all of the S&P 500 stocks. See Resources for links.

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