Towards the end of last year, we saw people selling out of their dividend paying stocks in anticipation of higher capital gains taxes, but we still like to keep dividend paying stocks in our portfolios. Yes, for some people there was in increase in the capital gains taxes this year, but even with the recent jump in taxes, the yields that we are able to realize with dividend stocks is still far greater than what we can expect to find from other fixed income investments.
Let's take a look at four solid dividend-paying stocks that every investor should consider:
McDonald's: McDonald's (MCD) is the king of fast food, and its 3.3% dividend yield makes it very attractive to investors. There has been a push in recent years away from fast food in favor of healthier menu options, but McDonald's has been able to do a good job adjusting its menu to keep up with the changing appetites of its consumers. Granted, there are still much healthier options available, but McDonald's has come a long way in the past few years. It has also improved its breakfast menu and found great success in putting more focus and attention to its coffee offerings.
McDonald's has raised its dividend every year going back to 1977. Its last dividend hike of 10% occurred in September. The company is currently paying an annual dividend of $3.08. If the company were to continue its streak of dividend hikes for the next 10 years, and use the 10% increase that it did back in September, its dividend would be $7.98, assuming that the stock does not split in that time frame. MCD stock has not split since 1999, but with the strength we have seen in the past two years in the stock a split in the next year of so is definitely not out of the question.
Ford Motor: The auto industry continues its comeback, and Ford Motor (F) recently doubled its dividend yield to a current 2.8%. The move was made as a way to assure investors that the company is bullish on its future, and to highlight its ever-improving balance sheet. When the economic crisis hit the auto industry in 2006, Ford was forced to suspend its dividend program, but restarted in during the first quarter of 2012, and as a result of being the only major American auto maker to not take bailout money, it has emerged from the recent recession with incredible strength. The auto industry, which was once on deaths door is getting stronger by the day, with analysts expecting annual vehicle sales of around 15.4 during the current year, and rising to 16.2 million by 2015.
Ford does not have the best dividend history considering that it was forced to suspend payments. We are very encouraged by seeing them double their dividend payment recently, but there are still some concerns considering the recent suspension. We do, however, believe in the future of the auto industry, and expect to see more dividend increases in the future. Even before the recent recession, Ford was not known for increasing its dividends on a very consistent basis, but it did pay, and we expect to see this continue in the future. We are not buying into Ford because we believe the dividends will necessarily continue to grow, we are buying into Ford because we like the current dividend, and believe the stock in general will continue to improve.