Wed. Oct. 7, 2009

10 Best U.S. Dividend Stocks *

In everything we do, we always want to be the best or be associated with the best. You never hear fans yelling, ‘We’re number 2, we’re number 2’, while holding two fingers in the air.  The same is true when selecting dividend stocks.

This is an article that I started to write several times, but would always stop after getting mired in the details. My natural tendency is make every question an analytical exercise and solve it by modeling and crunching numbers.

This time, I will show some restraint and take a little different approach by relying more on my subjective instincts. To that end, here are my selections for the 10 best U.S. dividend stocks:

10. Automatic Data Processing Inc. (ADP) – Analysis
ADP is one of the world’s largest independent computing services companies, provides a broad range of data processing services. The last slot was the most difficult to fill, due to the number of worthy companies. I considered all the Honorable Mentioned companies listed below and it came down to ADP and GPC. ADP gt the nod due its historic low debt levels and dividend payout.

9. Wal-Mart Stores (WMT) – Analysis
WMT Inc. is the largest retailer in North America. Great management, business plan and execution. It would have ranked higher, but WMT’s dividend yield tends to be lower end of my acceptable range.

8. The Coca-Cola Company (KO) – Analysis
KO is the world’s largest soft drink company. The Coca-Cola name is the world’s most recognizable trademark. For those who see no value in intangibles, try selling carbonated sugar water under another name.

7. McDonald’s Corporation (MCD) – Analysis
MCD is the largest fast-food restaurant company in the world. This company has grown its dividends at an incredible rate. Unfortunately, that is likely to slow, but MCD’s international presence will benefit to its shareholders in the future.

6. Abbott Laboratories (ABT) – Analysis
Abbott Laboratories is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products. Not the biggest or most well known drug company, but the one that arguably has one of the better track records.

5. Emerson Electric Co. (EMR) – Analysis
EMR primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. Industrials are not supposed to do well in recessions. Someone forgot to tell EMR. It has endured some bumps in the road, but has held up quite well.

4. SYSCO Corporation (SYY) – Analysis
SYY through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. This is a company that continues to perform in the face of expert predictions that it won’t.

3. 3M Co. (MMM) – Analysis
MMM is a diversified technology company with a presence in various businesses. This is a company I really like. Problem is so do a lot of other people and institutions. It is a stock you have to watch for the right entry point. I bought in March when the stock was trading in the high 40’s, it is now trading in the low 70’s.

2. The Procter & Gamble Company (PG) – Analysis
PG is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries. Good management capable of adjusting when necessary. Currently working to adjust to new market dynamics of the economic downturn.

1. Johnson & Johnson (JNJ) – Analysis
JNJ engages in the manufacture and sale of various products in the health care field worldwide. This was an easy selection for my top spot. Though not perfect the company has a history of making good decisions and executing on them.

The following companies earned an Honorable Mention:

That’s my 10 best U.S. dividend stocks. These are based on what stocks I believe will perform well as income investments over-time. Most are not good buys today, but are ones that I am always watching. Obviously, there is a great deal of subjectivity in a list like this. I would love to see your 10 best dividend stocks (doesn’t have to be U.S.)

Full Disclosure: Long ABT, WMT, KO, MCD, ADP, EMR, SYY, MMM, PG, JNJ, GPC, UTX, NUE, PEP. See a list of all my income holdings here.

(Photo Credit)

9 Responses to “10 Best U.S. Dividend Stocks *”

  1. Shawn says:

    Why KO over PEP? I like both, but own PEP because I like the diversity offered by having more than just sugary brown water.

    I think my current favorite at the moment is McCormick. Good wide moat company and I don’t see people saving money by not buying cinnamon or pepper any time soon.

  2. Shawn: A strong case could be made for PEP over KO. PEP’s Debt to total Capital and Free Cash Flow Payout over the last 10 years has been lower than KO’s. I ultimately went with KO due to its higher international name recognition. When you are selling a product like soft drinks, often the name is more important than the product. I own both.

    Best Wishes,

  3. TMT says:

    Good stuff here Div 4 life.

    I find it interesting that not a single utility company is on the list.

    After listening to the most recent conference call of Nike and looking at the numbers, if the price was right I believe NKE could be a good dividend paying company for the long term.

    That is a big IF though.

  4. LPC says:

    Ok, you covered a lot of my top holdings, but how about…
    YUM Yum! Brands
    WM Waste Management
    CB The Chubb Corp
    BKE Buckle Inc
    SJI South Jersey Inds. Inc. (a utility!)
    SWK Stanley Works
    BF/B Brown-Forman Corp Cl. B

    I could add more, but let’s go with this sampling

  5. AB says:


  6. bookvaluefan says:

    CPLF Energia [CPL] and Cemig [CIG]

    TransCanada [TRP]

    StatoilHydro [STO]

    Embotelladora Andina [AKO.B]



    Realty Income (0)

    Federal Realty iNcome

  7. tom dicks says:

    from my early days duk,xom,se,pfe now kmb,cop,t.ed,ko,nu,aod,dbn

  8. Brian says:

    I’m canadian so:
    Why not PM in your top ten? Don’t they always outperform? Jeremy Seigel 17.8% for 30 years, almost same growth in emerging markets compared to last 30 years, starting from a low p/e ratio.
    2010= 13 p/e 1972=24 p/e 2010=10% to 12% growth, 1972= 13.3% growth

  9. michael says:

    How about NLY,
    they have annual dividend pay of $2.72 right now,
    and at $17 dollars a stock right now, i couldn’t ask for much more