For our regular readers, you by now have learned just how much we like dividend-paying stocks here. We talk a lot about dividend stocks, and pay special attention to companies that have been growing dividends in recent years.
For our new readers, there are many reasons why we like playing dividend stocks. The first, and most obvious reason, is the income that dividend stocks bring to a portfolio. Whether you use the dividends to automatically reinvest for additional shares in the underlying security, or collect the dividends in cash, the value that is added on a regular basis goes a long way in achieving long-term investing success.
Another reason to like dividend stocks is that they tend to be slightly less volatile than the overall market. When markets are weak, investors tend to turn to dividend paying stocks for a added layer of stability. Companies would not be able to maintain their capital programs if they were experiencing problems with their underlying business, so dividends show management’s faith in the company’s direction.
Dividends on their own are a good indication of a company’s direction, but an even better indicator is seeing stocks that have a strong history of dividend growth. Dividend Aristocrats are companies that have grown their dividend for a minimum of 25 straight years. Streaks of this length offer investors a high level of reassurance that management has the ability to navigate a variety of market conditions while still managing to increase their distributions.
In times of low interest rates such as now, dividends become even more attractive since investors have few other options to find income. Rates have started to inch higher, but until we see several more rates increases from the Federal Reserve income investors will be forced to keep their money working in dividend stocks, and stocks with long streaks of dividend increases will be among the most sought after dividend plays.
Here are my five favorite Dividend Aristocrats.