The strong stock market this year has made many popular dividend-paying stocks expensive - but that such stocks are vital to your portfolio hasn't changed. The key now is to find those that also give you capital appreciation -- and we have five right here...
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In fact, if you had invested $10,000 in Microsoft in 1986 and the same amount in Cisco in 1990, you could have turned your $20,000 into about $8 million today.
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More and more S&P 500 companies are turning into dividend stocks, as yield-producing investments are becoming the hottest attraction in 2013.
Collective dividends per share for Standard & Poor's 500 companies increased roughly 16% year-over-year in 2012. Meanwhile, the number of companies paying a dividend over that period reached a new 13-year high of 405, or roughly 81% of the S&P 500, data from Factset shows.
Endless stimulus is ultimately self-defeating. But growth, especially when driven by trillions of dollars in economic need, is not. And this growth will not stop.
That's why it makes sense to keep your money in motion - albeit very deliberately and very cautiously - with choices that offer cold, hard cash as compensation for the risk you take in owning them.
Check out this trio of income titans here...
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It's only April, but it appears dividend payouts this year will soar past 2012's tally - meaning all investors need to know how to find the best dividend stocks or risk missing out on record-high yield.
Barron's reports that in Q1, 944 of approximately 10,000 U.S. companies boosted payouts, either by increases, extras or resumption. That was up a hefty 39.4% from 677 companies a year ago.
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Investors are in love with dividend stocks this year - and there are even more juicy yields to choose from than before.
But one thing you need to be careful to avoid is a dividend stock that boasts a huge yield, but can't sustain it.
For example, look at CenturyLink Inc. (NYSE: CTL). CTL has been a favorite dividend stock for years, but slashed its dividend by 26% in February. The move caught investors off guard. Shares plunged 23% in one day - the biggest one-day decline since at least 1980 - wiping out about $6 billion in market value.
The stock still yields nearly 6%, but confidence in the company to maintain its payout has been damaged.
Positive dividend actions have far outweighed negative announcements over the past few years. In 2013's first quarter, 732 companies boosted their payouts compared with 552 in the year-earlier period.
But in March, 73 U.S. companies pruned their payouts - not far off the record of 93 in December 2012.
Usually companies frame dividend cuts as necessary evils - necessary as in the cut was needed to conserve cash. Read those tea leaves and it's easy to realize that if a company needs to cut its dividend to conserve capital, it probably is not worth investing in in the first place.
The good news is investors can skirt stocks that are vulnerable to dividend reductions. We rounded up a few names that deliver tempting yields, but look like they could be on the way to cutting their payouts.
Thanks to this year's booming market for initial public offerings (IPOs), there are a handful of new dividend stocks for yield-starved investors.
In the first quarter of 2013, 45% of all new offerings paid a dividend. That compares to just 16% in Q1 of 2012, according to data from Renaissance Capital.
This is the most dividend stocks to debut in a quarter since Q2 of 2008, when 69% of IPOs paid a dividend.
The trend is in direct response to investors' hunt for yield, and comes at a time when dividend stocks should be part of everyone's portfolio.
As Money Morning Global Investing Strategist Martin Hutchinson has explained, "The truly rich don't spend their days watching the financial news and trading stocks. They're too smart for that. They know that investing in steady income-producing dividend stocks is just as rewarding over the long haul."
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It's been a great year for anyone interested in dividend stocks - and it looks like it'll get even better.
Corporations in the S&P 500 are expected to pay at least $300 billion in dividends in 2013, up from last year's $282 billion, according to S&P Dow Jones Indices.
And some of the dividend hikes represent a healthy payout boost.
For example, one of the latest in a string of companies to boost dividends, QUALCOMM Inc. (Nasdaq: QCOM), recently announced a 40% increase in its dividend.
Besides QUALCOMM, Hess Corp. (NYSE: HES) hiked its dividend 150%, HollyFrontier Corp. (NYSE: HFC) 50%, The Home Depot Inc. (NYSE: HD) 34%, The TJX Cos. Inc. (NYSE: TJX) 26% and Applied Materials Inc. (Nasdaq: AMAT) 11%, to name just a handful.
The good news: If you haven't yet joined the payout party, you can expect even more dividend increases in the weeks ahead.
As Money Morning Executive Editor Steve Christ told us this week, finding solid dividend stocks in different sectors is a key to finding financial freedom, thanks to compounding.
"This compounding effect arises when your dividend yield is added to the principal. From that moment on, the interest begins to earn interest on itself," explained Christ. "Over the long haul, that process can add up to a small fortune - even with very modest investments. All it takes is time."
How do you find theses reliable dividend payers?
For starters, consider dividend stocks that have a history of raising their payout. Dividend.com recently compiled a list of stocks that have hiked their dividends for at least 25 years.
To take it a step further, we compared that list to Standard & Poor's "Dividend Aristocrats" - large-cap, blue-chip companies that have increased dividends for at least 20 consecutive years.
Some of the "Aristocrats" have hiked their payouts for much longer than that, like these seven, which have done so for at least 50 years:
Following a banner year for dividend stocks in 2012, 2013 is delivering more of the same as an increasing number of companies are either initiating cash dividends or boosting existing payouts.
From Feb. 1 to Feb. 8, at least 15 companies increased their cash dividends. That list included familiar names such as Dow component 3M Co. (NYSE: MMM), Allstate Corp. (NYSE: ALL) and Archer Daniels Midland Co. (NYSE: ADM), a new addition to Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) equity portfolio.
It was more of the same when 14 companies raised their payouts in the week ending Feb. 15. That list includes Comcast Corp. (Nasdaq: CMCSA), PepsiCo Inc. (NYSE: PEP) and United Parcel Service Inc. (NYSE: UPS).
With all these familiar blue chips delivering ever-increasing dividends, it is not surprising that some stocks of the same caliber go overlooked by investors. Here are a couple of those unheralded names investors on the hunt for dividend stocks should become more familiar with.
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Near-zero interest rates have lots of savers clamoring for yield and plunging into dividend stocks.
Compared with paltry yields on a bevy of bonds, dividend stocks - especially those with the potential of capital appreciation - have become progressively more attractive to income-seeking investors.
Now's a good time to hunt for dividend stocks, as more companies increase payouts. Dividend payments grew sharply in Q4 2012, with 1,262 dividend increases reported, a 94.5% gain over the 649 increases in Q4 2011, according to S&P Dow Jones Indices.
And rich dividend payments are expected to continue among companies flush with cash since
they have curtailed expansion and investment amid growing global uncertainty.
In fact, more than 5,000 analyst estimates compiled by Bloomberg News forecast that companies in the MSCI World Index will boost payments by 3.8% to a combined $39.43 a share this year, up from a low of $29.58 in 2009.