In a previous article about the top Canadian dividend growth stocks for 2013, I promised that I would write about U.S. dividend growth stocks and the vast differences between the companies. What is the biggest difference? Well for one, the top dividend stocks in the U.S. are much more mature, and have a much longer history of dividends. In fact, most of the top 10 US dividend stocks in the table below have 50 years + of dividend increases. Compare that with the Canadian table where Fortis (FTS), the company with the longest history of dividend increases in Canada, with 21 years.
Dividend investing is a popular strategy these days, especially with low interest rates, and not a lot of other options to obtain income from your hard earned savings. If you’ve been following Million Dollar Journey for a while, you’ll know that I’m a fan of dividend growth investing because it provides dependable stream of increasing income. For those of you interested in this strategy as well, you can see an example through my leveraged dividend portfolio.
A question that I often get is “what are my favorite dividend stocks?”. As a dividend growth investor, I like to invest in dividend paying companies that have a history of increasing their dividends. As I keep my Canadian dividend stocks outside my registered portfolios, I keep my U.S dividend stocks within my RRSP. I do this for a number of reasons – you can find out more details in my article portfolio allocation.
Doing some background research, I dug up the the top 10 dividend growth stocks in the U.S. I have created a list below, but more due diligence is required before you buy as the only criteria I used is number of years of increasing dividends.
Data as of April 12, 2013
|Company||Symbol||Years of Dividend Growth||5 year Dividend Growth Rate||Payout Ratio||Current Yield|
|Proctor & Gamble Co||PG||59||9.96%||51%||2.80%|
|Lowe’s Companies Inc||LOW||51||16.59%||37%||1.65%|
|Johnson & Johnson||JNJ||50||8.03%||63%||2.95%|
As a disclaimer, I hold positions in 6 out of the 10 stocks listed above. My holdings include PG, 3M, JNJ, KO, PEP, ABT. For me, I like dividend stocks with a yield above 2%, a payout ratio less than 70%, strong financial statements, and, of course, a history of dividend increases. Once I create a dividend stock watchlist, I wait for them to drop in price to reach a particular dividend yield (when to buy dividend stocks).
As previously mentioned, more due diligence is required before blindly buying company’s with the longest history of dividend growth. For example, from the table above, the top stock, DBD, has a relatively high payout ratio for an IT company which may or may not be sustainable.
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