Near-zero-based interest rates, historically low yields on Treasuries and CDs, and the end of the bond bull market are wrecking investors' attempts to steadily grow - and eventually live off - their hard-earned savings.
And while the government insists inflation is tepid, those of us who live here in reality know that prices continue to rise faster than wages.
Dividend-growth stocks, of course, give you the chance to overcome these obstacles. And they also give you the chance to make an incredible amount of money... with returns that rival - and even beat - alluring small-cap growth stocks.
It's been proven time and again - 85%-90% of total stock market returns come from dividends and the reinvestment of those dividends.
To be sure, successful investing comes from continuous performance, not instantaneous performance.
And when you buy the best dividend payers, the cash disbursements can grow so quickly - and so steadily - that over time you'll actually make more in dividends than you paid to buy the stocks that produce them.
That's why we're highlighting the companies below.
Of the 4,967 dividend-paying stocks, these three companies provide superior payouts and superior long-term growth potential. Taking a stake in each one could be the best dividend growth strategy you can employ right now... and for the next 20 years.
This first one could be the most productive cash cow you ever buy...
If you are looking for a steady stream of safe dividends in today's troubled markets, the list of "Dividend Aristocrats" is a good place to start.
Compiled and tracked by Standard & Poor's, Dividend Aristocrats are companies that have consistently increased their dividend payouts for 25 consecutive years. Currently there are 54 such companies.
That gives yield conscious investors a long list of solid dividend-paying stocks to choose from with a reliable track record of providing guaranteed payments-even during volatile markets and down economic cycles.
If they're in a non-financial business, they also have the advantage of providing inflation protection, as their earnings will tend to increase with prices and their dividend increases should also keep pace.
Of course, these aristocrats tend to pay only moderate dividends, in the 2.5%-4.5% range, but that's still better than you get on bonds today, and if you're living on the income you are much better protected against a burst of inflation.
The Business: Emerson is a global diversified technology company headquartered in St. Louis, MO.
Recent Price: $67.95
Market Cap: $47.05 Billion
3-Yr. Target Price: $97.35
Institutional Ownership: 73.41%
Beta: 1.22
Annual EPS Estimate: $4.21
MMR Rating*: Buy
* Currently held in the Money Map Report Growth & Income Portfolio.
An excellent Dividend Aristocrat we recommend is Emerson Electric Co. (NYSE: EMR).
Emerson is a global provider of electrical engineering products and services and has increased its dividend every year since 1957 and currently yields 2.6%.
If you look at Emerson's dividend record over the last 20 years, you will find that its quarterly dividend has risen from 9.75 cents in the second quarter of 1994 to 43 cents today-a 341% increase.
That's an annual growth rate over 7.5%, far above the average 2.5% consumer price inflation rate during this same 20-year period.
Granted, it may not sound like much in a single year--but over a 20-year period it's the kind of difference great fortunes are made of.
Combine the dividends with the over 350% gain the stock has returned over the same 20 years and you've got one heck of a long-term investment.
The good news for investors is that the company that sold the first electric fan back in 1892 has been through thick and thin and there's no reason not to believe it won't continue rewarding patient investors.
Master Limited Partnerships (MLPs) are red-hot for a reason...
These investments not only offer a high-yield, but can also benefit from inflation, as the price of oil rises. But the best thing about MLPs is they give you a way to earn higher yields... and pay lower taxes.
You see, due to an obscure law passed during the Reagan era, companies that service the oil and energy sector are allowed to funnel profits directly to their investors.
And because of a unique tax loophole, investors who hold MLPs for the long term can completely avoid paying taxes on 80%-90% of all of their earnings.
For MLP investors, those returns can be substantial.
First, there are the hefty "distributions" MLPs payout year after year. In fact, several of the 50 companies in the benchmark Alerian MLP Index offer yields of 7% or higher.
The Business: Martin Midstream collects, transports, stores, and markets petroleum products and by-products in the U.S. Gulf Coast region.
Recent Price: $41.05
Market Cap: $1.18 Billion
3-Yr. Target Price: $75.82
Institutional Ownership: 27.70%
Beta: 0.85
Annual EPS Estimate: $1.97
EAD Rating*: Buy
* Currently held in the Energy Advantage Growth & Income Portfolio.
Second, there's price appreciation.
The Alerian MLP index, which tracks 50 of the biggest MLPs, has outperformed the market by more than a 2-1 margin since its inception in June 2006. And our favorite MLP at the moment is Martin Midstream Partners LP (Nasdaq: MMLP).
Martin Midstream is a leader in storage and terminal capacity in the U.S. Gulf region, supplemented by a fleet of onshore floating storage barges.
The company also provides value-added byproducts, especially in oil products, and sulfur from refinery operations. In addition, it has over 700 miles of gathering and transport pipelines in the natural gas production areas of East Texas.
This Kilgore, TX-based MLP has an attractive 7.45% yield and has steadily increased its dividend every year since going public in 2002. Its quarterly payout has more than doubled from 30.77 cents to today's 79 cents dividend.
And it's the perfect play on the highly lucrative "midstream."
That's according to Dr. Kent Moors - an advisor to six of the world's top 10 oil producers, and Money Morning's Global Energy Strategist.
He says so long as you focus your energy investments in the middle of the oil and gas supply chain, you're going to make money ... A LOT of money.
That's because the midstream provides critical services in transportation, storage, and refining, connecting the producers to the end-users all across the country.
As we've seen over the years, the midstream is the best source for higher-than-average yields and the best opportunity for share appreciation as demand and supply both continue to rise.
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Like MLPs, Real Estate Investment Trusts, or REITS, offer investors the chance to collect some of the highest dividend yields available today, while also avoiding the onerous taxes.
REITs came into existence because of U.S. President Dwight Eisenhower's "Cigar Tax Excise Tax Extension" of 1960.
Under this initially obscure tax provision, REITs can avoid corporate income tax, provided they invest in real estate-related assets and pay out at least 90% of their income in dividends to investors.
Mortgage REITs, as their name suggests, invest in residential and commercial mortgages.
Within the residential mortgage REIT category, some invest in agency-guaranteed REITs while others specialize in REITs that are not guaranteed.
A couple cautions with REITS...
Some show yields that are literally too high to be true. That either means the company is paying out too much of its profits or cash flow to maintain the dividend, is employing some ill-advised financing strategy or is counting on the current-interest-rate anomaly to continue.
None of those three can be maintained for long. And you don't want to be the one who gets trapped.
Furthermore, when interest rates rise, they will be at risk just like bonds.
However, we've addressed those concerns with chosen MLPs and REITs, and remember these companies do not pay tax at the corporate level... and for that reason generally pay a higher yield.
The Business: Omega invests in income-producing healthcare facilities, principally long-term skilled nursing facilities in the U.S.
Recent Price: $36.72
Market Cap: $4.67 Billion
3-Yr. Target Price: $49.50
Institutional Ownership: 83.70%
Beta: 0.96
Annual EPS Estimate: $1.44
MMR Rating: Buy
For a top-choice REIT, take a look at Omega Healthcare Investors Inc. (NYSE: OHI), which yields 5.88% at the moment.
Omega focuses on skilled nursing facilities in the U.S., with 432 properties run by 51 healthcare operators.
OHI does not primarily invest in mortgages.
Instead, it buys the real estate and then leases it on a long-term basis to the healthcare operator, who takes the operating risk, including such factors as Medicare reimbursement.
This generates a lower up-front yield than mortgage investment.
However, the leases are written with an escalator clause for inflation, and OHI remains the owner of the property itself, which means the yield on its investments tends to rise with inflation.
An additional wrinkle: As owner of the properties, OHI gets to take depreciation on them.
That depresses its book net income. It doesn't give OHI a tax benefit (because REITS don't pay tax at the corporate level), but it allows OHI to pay out a high percentage of its cash flow as dividends.
Even more good news for investors is that Omega has demographics working in its favor.
The primary customers for skilled nursing care facilities are the very old, and the number of Americans aged 85 plus is exploding, expected to increase from six million in 2010 to 21 million in 2050, going from 2% to 5% of the total U.S. population.
What's more, typical senior medical procedures are cheaper in skilled nursing care facilities than in other healthcare providers, so Medicare's cost pressures should result in these facilities getting an increased share of the medical care dollar.
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