Best Long-Term Dividend Stocks

Dividend Growth Investor shares his journey on his quest for achieving a sizeable passive income stream that would be realized by investing in dividend paying stocks that have consistently increased their payments over time. Dividend Growth Investor hopes that his blog will serve as an inspiration for his readers and that it would change their financial lives for the better.

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In his book, Stocks for the Long Run, Wharton Professor Jeremy Siegel proves that stocks have been the best performing investing for the past 200 years in the US. Equities outperformed other assets classes such as gold and fixed income. Typically, stock returns are derived from price appreciation and dividends. Dividend payments have historically accounted for 40% of the average annual stock market return. A lesser known fact is that reinvested dividends have provided for 97% of historical stock market returns.

During tough market conditions such as the 2008 bear market, investors realize the positive of getting a return on your investment even if prices are collapsing across the board. Add in dividend increases, and several years down the road the income off the initial investment could be producing sizeable returns. Generalizations like this are usually ignored by investors however, as it doesn’t really provide a clear plan for action.

In order to respond to this I have included the best dividend stock for the long run. They come from many sectors and industries, and represent growing as well as maturing industries. The portfolio is not a recommendation to buy or sell any stocks, as it reflects my specific financial risk tolerance. Always do your own research before initiating a position in any financial instrument.

Consumer Discretionary

FDO Family Dollar Stores (analysis)
MCD McDonald’s Corp (analysis)
MHP McGraw-Hill Companies (analysis)
SHW Sherwin-Williams (analysis)
VFC VF Corp (analysis)

Consumer Staples

CLX Clorox Co (analysis)
KO Coca-Cola Co (analysis)
CL Colgate-Palmolive
KMB Kimberly-Clark (analysis)
PEP PepsiCo Inc (analysis)
PG Procter & Gamble (analysis)
SYY Sysco Corp (analysis)
WMT Wal-Mart Stores (analysis)
ADM Archer Daniels Midland (analysis )
HRL Hormel Foods Corp.

Energy

CVX Chevron Corp (analysis)
XOM Exxon Mobil (analysis)
BP British Petroleum (analysis)

Financials

AFL AFLAC Inc (analysis)
CINF Cincinnati Financial (analysis)
STT State Street Corp (analysis)
CBSH Commerce Bancshares (analysis)
CB Chubb Corp. (analysis)

Health Care

BDX Becton, Dickinson
JNJ Johnson & Johnson (analysis)
MDT Medtronic, Inc

Industrials

MMM 3M Co (analysis)
EMR Emerson Electric (analysis)
GWW Grainger (W.W.) (analysis)
ITW Illinois Tool Works (analysis)
TFX Teleflex Inc (analysis)
UTX United Technologies (analysis)
DOV Dover Corp. (analysis)

Information Technology

ADP Automatic Data Proc (analysis)

Materials

APD Air Products & Chem (analysis)
VAL Valspar Corp (analysis)
NUE Nucor Corp. (analysis)

Utilities

ATO Atmos Energy Corp
ED Consolidated Edison (analysis)
BKH Black Hills Corp.

Typically dividend investors are being told to hold stocks in certain sectors such as energy trusts, utilities and financials. I do believe however that concentrating ones portfolio only on certain sectors does increase your risk. Chasing current dividends yields is seldom the best plan for action. Overweighting certain sectors might also be a recipe for a financial disaster. Maintaining a balanced approach that focuses on dividend growth and yield, as well as the traditional tools like diversification and dollar cost averaging, could be the best strategy for the long run. Furthermore being flexible could also aid to your portfolio. Chances are that new sectors of the economy will emerge over the next few decades. Adding reasonably priced dividend achievers is one way to be involved in those stocks.

The dividend stocks for the long run portfolio is underweight in technology and telecommunications services, and overweight the Consumer Staples and Consumer discretionary sectors. It only contains one foreign based stock, BP. The average yield is 3.45%, whle the average five year dividend growth rate is 15.90%. If the long term dividend growth rate stays at 6% on average for the whole portfolio, the expected yield on cost will be around 7% in 12 years and 14% in a little over 2 decades.

I will be tracking the following portfolio versus the market using marketocracy virtual mutual funds.

Disclosure

I have positions in ADM, ADP, AFL, APD, BP, CINF, CLX, ED, EMR, FDO, GWW, ITW, JNJ, KMB, KO, MCD, MHP, MMM, NUE, PEP, PG, SHW, STT, TFX, UTX, WMT