Start With Quality Stocks

Just as ‘better ingredients make a better pizza’, higher quality stocks provide more predictable dividends and an increased chance of becoming one of these Golden Stocks. As with any income investment, I look for stocks that have consistently increased their dividends for many consecutive years and operate in businesses that do well over all parts of the economic cycle.

Add In A Generous Portion Of Time

This is not an overnight process. Most good things are worth waiting for. If you are to establish a long-term relationship with a stock, it better be a quality stock. Time is a powerful force, with it we can overcome poor choices, poor timing and bad decisions. Without it, we immediately are forced to pay for our indiscretions.

Strategic Selection Of Entry And Exit Points

Just typing the above made the hair on the back of my neck stand up — It sounds too much like market timing, for which I have no use for. However, all successful strategies have an element in them that encourages investors to buy low and sell high. Consider how asset allocation works. When one sector experiences a decline, the investor will buy that sector to keep his or her allocation in balance. Later when it rises, the investor may be forced to sell to rebalance their allocation. In much the same way, I tend to smile a lot when the market is crashing-and-burning. It is at these times when truly great stocks are being traded and rock-bottom prices. As we will see, these purchases are more quickly turned into Golden Stocks.

Three Golden Stocks

So what exactly is a Golden Stock? The concept did not originate with me, and others have different names for it, including ‘zero-basis stock.’ I don’t care for that name since, in reality it is nearly impossible to hold a stock with zero basis (at least the way the IRS calculates basis). A Golden Stock is one in which I have fully recovered my entire investment either through dividends or from partial liquidation or a combination of both. In my income portfolio, I am currently holding these 3 Golden Stocks:

3M Company (MMM) | YOC: 4.4% | Yield: 2.3%
This stock was originally purchased in March 2009 when the market was at its low. In October 2010, I sold 50% of my shares. Proceeds from that sale, along with dividends received, account for 101.1% of my original investment.

Emerson Electric Co. (EMR) | YOC: 3.5% | Yield: 2.3%
My EMR holdings were purchased in July 2009 and October 2009. The July purchase was at $31.64 while the October purchase was at $39.59. In February 2011, I sold 55% of my shares. Proceeds from that sale, along with dividends received, account for 100.4% of my original investment.

Integrys Energy Group, Inc. (TEG) | YOC: 7.3% | Yield: 5.4%
TEG is different from the first two stocks in that its quarterly dividend has been frozen at $0.62/share since March 2009. I purchased one block in November 2008 at $43.81 and a second block in February 2009 at $36.83. In March 2011, I sold 67% of my shares. Proceeds from that sale, along with dividends received, account for 102.7% of my original investment.

More Golden Stocks On The Way

In addition to the above, several of my other income holdings are well on their way to becoming Golden Stocks. These include:

The Coca-Cola Company (KO) | YOC: 3.8% | Yield: 2.7%
This stock is in most every dividend growth investors portfolio. I have currently recovered through sales and dividends 21.2% of my initial investment.

Realty Income Corp. (O) | YOC: 6.9% | Yield: 5.0%
This stock is hold-over from my yield chasing days. When I started investing the right way, I held on to a handful of the better high-yield dividend stocks. I have currently recovered through sales and dividends 26.8% of my initial investment.

Consolidated Edison, Inc. (ED) | YOC: 5.5% | Yield: 4.7%
I have held a position in this stock since January 2005. Though its dividend increases have been rather modest, they have been consistent. I have currently recovered through sales and dividends 43.8% of my initial investment.

Commercial Net Lease Realty, Inc. (NNN) | YOC: 7.9% | Yield: 5.9%
This stock is another hold-over from my yield chasing days. In May 2009, I sold 51% of my shares after NNN failed to raise its dividend. However, it later raised its dividend in August 2010 to keep its streak of annual dividend increases alive. I have currently recovered through sales and dividends 68.6% of my initial investment.

Health Care Property Investors Inc. (HCP) | YOC: 6.0% | Yield: 5.0%
Yet another hold-over from my yield chasing days. I have held a position in this stock since March 2005. On paper, I should have sold this stock a long time ago, but it has continued to appreciate and to raise its dividend. It will likely be my next Golden Stock. I have currently recovered through sales and dividends 81.2% of my initial investment.

Conclusion

Needless to say, the statement that I will NEVER lose money on my 3 Golden Stocks is predicated on not purchasing any additional shares, which may or may not be the case. These stocks have already paid for themselves once, and given the right circumstances, I would be willing to let them do it again. Dividend growth stocks are truly stocks that pay you to own them.

Full Disclosure: Long MMM, EMR, TEG, KO, O, ED, NNN, HCP. See a list of all my income holdings here.

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- Who is Irving Kahn and Why Should We Listen to Him?
- Bogle Still Believes In Buy And Hold

(Photo Credit)

Dividends Received

Total dividends received during the month were $166.53, consisting of:

• $24.81 Wal-Mart (WMT)
• $7.78 Vanguard Intermediate-Term Bond ETF (BIV)
• $12.01 Vanguard Long-Term Bond ETF (BLV)
• $16.15 United Technologies Corp. (UTX)
• $8.71 Emerson Electric Co. (EMR)
• $18.36 Johnson & Johnson (JNJ)
• $15.47 Consolidated Edison Inc. (ED)
• $4.94 PowerShares Emerging Mkt Debt (PCY)
• $18.70 McDonald’s Corp. (MCD)
• $39.60 Harleysville Group Inc. (HGIC)

Dividend Stock Purchases

The following securities were purchased during the month:

• 34 Shares Colgate-Palmolive Co. (CL) providing $72.08 in annual dividend income
• 30 Shares Abbott Laboratories (ABT) providing $59.84 in annual dividend income
• 132 Shares Medtronic, Inc. (MDT) providing $118.80 in annual dividend income

Also, I liquidated my position in Vanguard Intermediate-Term Bond ETF (BIV).

Annualized Dividend Income

Including the above purchases, my annual PCP dividend income is now $2,200.32 at the current dividend rates. This is up $13.66 from last month’s $2,186.66 amount. The PCP has never had a monthly decline in annualized dividend income.

Portfolio Returns

• Month: 4.57%
• Year-to-date: 8.49%
• Life-to-date: 13.00% (annualized)

My PCP holdings are always available by selecting the Holdings option from the menu in the header. The next PCP update will be mid-November.

(Photo: sanja gjenero)

Calculating A Dividend Stock’s NPV MMA Differential

The basis of this calculation is a hypothetical $1,000 investment in a stock and a Money Market Account (MMA) earning earning a 20 year average rate (I use a 20 year Treasury as a proxy).  The value calculated is the net present value (NPV) of the difference between the dividend earnings of this investment and the interest income from the MMA over 20 years.  Other assumptions include: 1.) dividends grow at the calculated dividend growth rate, 2.) dividends are reinvested, 3.) share price appreciation is not considered, 4.) interest income is reinvested in the MMA. The dividend growth rate used is calculated as the minimum dividend growth rate of the 1, 3, 5, 7, 10 year dividend growth rate or 15%, if dividends grew on average in excess of 15% for each consecutive 4 year periods, within the last 10 years of history.

Interpreting The NPV MMA Differential

The calculation takes into account the time value of money, thus if it takes too long for the stock’s dividend yield to exceed the MMA rate, then the calculation will return a negative value. This means you are financially better off to put your money in the MMA. If the dividend stock is a better investment then the NPV MMA Diff. calculated will be positive. Like dividend yield, it is desirable to have a higher NPV MMA Diff. But also like a dividend yield, if it is too high, you need to start asking why? The NPV MMA Diff. can be used to compare two or more investments.

Comparing Various Dividend Stocks NPV MMA Differential

Like all calculations, the value of the output is directly tied to the quality of the input (garbage in, garbage out). For the sake of the illustration let us consider the calculated inputs are correct and sustainable.

Which of these would you rather purchase:

- Vector Group Ltd. (VGR) with a 9.99% yield and a 3.61% dividend growth rate
- Chevron Corp. (CVX) with a 3.68% yield and a 5.95% dividend growth rate
- McDonald’s Corporation (MCD) with a 3.23% yield and a 15.00% dividend growth rate

Based on the NPV MMA Diff. they would be ranked like this:

1. McDonald’s Corporation (MCD) | NPV MMA Diff: 8,429
2. Vector Group Ltd. (VGR) | NPV MMA Diff: 6,640
3. Chevron Corp. (CVX) | NPV MMA Diff: 780

As you can see neither yield nor dividend growth is the sole determinant of value. Below are several other companies in ascending order of their NPV MMA Diff:

General Dynamics (GD)
NPV MMA Diff: (339) | Yield: 2.16% | Growth: 2.01%

3M Company (MMM)
NPV MMA Diff: (260) | Yield: 2.47% | Growth: 2.00%

Clorox Company (CLX)
NPV MMA Diff: 171 | Yield: 3.12% | Growth: 4.35%

Consolidated Edison (ED)
NPV MMA Diff: 537 | Yield: 5.37% | Growth: 0.85%

Lowe’s (LOW) | Analysis
NPV MMA Diff: 748 | Yield: 1.38% | Growth: 15.00%

The Coca-Cola Company (KO) | Analysis
NPV MMA Diff: 890 | Yield: 3.34% | Growth: 7.32%

National Retail Properties, Inc. (NNN)
NPV MMA Diff: 972 | Yield: 6.91% | Growth: 0.00%

Johnson & Johnson (JNJ) | Analysis
NPV MMA Diff: 1,245 | Yield: 3.33% | Growth: 8.42%

Raven Industries (RAVN) | Analysis
NPV MMA Diff: 1,855 | Yield: 1.87% | Growth: 15.00%

TC PipeLines, LP (TCLP)
NPV MMA Diff: 2,255 | Yield: 8.01% | Growth: 1.74%

And if you believe all the underlying inputs (which I don’t), the top stock on the list is:

Courier Corporation (CRRC)
NPV MMA Diff: 54,801 | Yield: 5.56% | Growth: 15.00%

As with any projection based on historical information, the analyst must determine the sustainability of the inputs going forward. Put another way, past performance is no indication of future results. I have always heard the luckiest people in the world are those who work the hardest. In the same vein, the secret to finding the best dividend stocks often involves rolling up our sleeves and doing our homework.

Full Disclosure: Long CVX, MCD, MMM, CLX, ED, KO, NNN, JNJ. See a list of all my income holdings here.

(Photo Credit)

Below are several companies giving their shareholders a reason not to sell by increasing their cash dividends:

Enterprise Products Partners (EPD) is an integrated provider of natural gas and natural gas liquids services, including processing, fractionation, storage, transportation, and terminalling. April 13th the partnership increased its quarterly distribution to $0.5675/unit. The quarterly distribution will be paid on Thursday, May 6, 2010, to unit holders of record as of the close of business on Friday, April 30, 2010. The ex-dividend date is April 28. The yield based on the new payout is 6.36%.

Genesis Energy (GEL) is a limited partnership focused on the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. April 14th the partnership raised its quarterly distribution 8.9% over the first quarter 2009 to $0.3675/unit. The distribution will be paid on May 14, 2010, to Common Unitholders of record at the close of business on May 4, 2010. The ex-dividend date is April 30, 2010. The yield based on the new payout is 7.20%.

HB Fuller (FUL) is an international manufacturer of adhesives, sealants, paints and specialty construction products. April 15th the company increased its quarterly dividend 2.9% to $0.07/share. FUL is a Dividend Achiever and has raised its dividend for 41 consecutive years. The yield based on the new payout is 1.17%.

Donegal (DGICA) offers personal and commercial lines of insurance to businesses and individuals in 18 Mid-Atlantic, Midwestern and Southeastern states. April 15th the company raised its quarterly dividend 2.2% to $0.115/share. The dividend is payable May 17, 2010 to stockholders of record as of the close of business on May 3, 2010. The yield based on the new payout is 3.08%.

In addition to the above dividend raisers, the following Dividend Aristocrats declared regular quarterly cash dividends:

April 12th Walgreens (WAG) declared a quarterly dividend of $0.1375/share with a 1.5% yield. The dividend is payable June 12, 2010, to shareholders of record May 20, 2010. The ex-dividend date is May 6, 2010. [Analysis]

Pitney Bowes (PBI) on April 12 declared a quarterly dividend of $0.365/share with a 5.9% yield. The dividend is payable June 12, 2010, to shareholders of record on May 14, 2010. The ex-dividend date is May 12, 2010.

April 15th Consolidated Edison, Inc. (ED) declared a quarterly dividend of $0.595/share with a 5.3% yield. The dividend is payable June 15, 2010, to stockholders of record as of May 12, 2010. The ex-dividend date is May 10, 2010.

If you invest in good solid stocks that increase their dividends on a consistent basis, day-to-day share movements will not concern you. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long ED. See a list of all my income holdings here.

(Photo Credit)

What’s the difference between a Ponzi scheme and a utility company? Before I answer that question, let’s look at what a Ponzi scheme is.  Wikipedia defines it as:

A  fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.

In effect, a Ponzi scheme pays yesterday’s investors with money from today’s investors. It works great until there aren’t enough new investors to pay the old investors. In a similar manner, most utility companies rely on new capital either in the form of debt or equity to fund investment and to pay dividends. Consider the following:

Atmos Energy Corp. (ATO) – Yield: 4.88%
Shares Outstanding: 2000 31m; 2009 92m
Long-Term Debt: 2000 363.2m; 2009 2,159.5m
Years of Negative Free Cash Flow: 5 of 10

Black Hills Corp. (BKH) – Yield: 5.10%
Shares Outstanding: 2000 22m; 2009 38m
Long-Term Debt: 1999 160.7m; 2008 719.2m
Years of Negative Free Cash Flow: 7 of 10

Connecticut Water Service Inc. (CTWS) – Yield: 4.01%
Shares Outstanding: 2000 7m; 2009 8m
Long-Term Debt: 1999 65.4m; 2008 92.2m
Years of Negative Free Cash Flow: 5 of 10

California Water Service Group (CWT) – Yield: 3.29%
Shares Outstanding: 2000 15m; 2009 20m
Long-Term Debt: 1999 156.6m; 2008 373.5m
Years of Negative Free Cash Flow: 10 of 10

Consolidated Edison, Inc. (ED) – Yield: 5.52%
Shares Outstanding: 2000 212m; 2009 276m
Long-Term Debt: 2000 5,415.4m; 2009 9,854.0m
Years of Negative Free Cash Flow: 6 of 10

MGE Energy Inc. (MGEE) – Yield: 4.40%
Shares Outstanding: 2000 16m; 2008 22m
Long-Term Debt: 1999 148.6m; 2008 272.5m
Years of Negative Free Cash Flow: 7 of 10

Middlesex Water Co. (MSEX) – Yield: 4.31%
Shares Outstanding: 2000 10m; 2008 13m
Long-Term Debt: 1999 82.5m; 2008 118.2m
Years of Negative Free Cash Flow: 10 of 10

Progress Energy, Inc. (PGN) – Yield: 6.48%
Shares Outstanding: 2000 157m; 2008 260m
Long-Term Debt: 1999 3028.6m; 2008 10,659.0m
Years of Negative Free Cash Flow: 5 of 10

Integrys Energy Group, Inc. (TEG) – Yield: 6.17%
Shares Outstanding: 2000 26m; 2008 76m
Long-Term Debt: 1999 634.5m; 2008 2,396.7m
Years of Negative Free Cash Flow: 10 of 10

Each of the above companies are growing their debt and shares outstanding while generating insufficient cash to fund their operating expenses, including normal capital replacements, in at least 5 of the last 10 years. For a company to consistently raise its dividends, it must generate strong cash flows sufficient to meet operating obligations and to service outstanding debt. When the day comes that these companies can not raise enough capital to fund the operating requirements, the first source of additional cash will likely come in the form of a lower or eliminated dividend.

So, back to the original question, what is the difference between a Ponzi scheme and a utility? The answer is simply disclosure. All the above information on these companies was made available via S.E.C. filings. Unlike Bernard Madoff, these companies are telling you exactly what they are doing, thus there is no intent to defraud. I own some of the companies above, but I won’t be rushing to add to increase my positions.

Caveat emptor!

Full Disclosure: Long ED, PGN, TEG. See a list of all my income holdings here.

(Photo Credit)

As for my portfolio, I consider asset allocation only when looking at my holdings in total. It would be much too difficult to maintain a good allocation within individual portfolios (income, growth, 401(k), Roth IRA, etc.), while trying to maintain my overall allocation. However, an investor could build a degree of allocation into a portfolio of dividend income securities. Consider the following:

Business Services Sector

• Automatic Data Processing Inc. (ADP)
  Yield: 3.33% | Style: Large Growth | Analysis
• C H Robinson Worldwide Inc. (CHRW)
  Yield: 1.86% | Style: Large Growth
• Expeditors International of Washington Inc. (EXPD)
  Yield: 1.16% | Style: Mid Growth

Consumer Goods Sector

• Clorox Company (CLX)
  Yield: 3.23% | Style: Mid Core
• Coca-Cola Company (KO)
  Yield: 3.04% | Style: Large Growth | Analysis
• Procter & Gamble Company (PG)
  Yield: 2.85% | Style: Large Core | Analysis

Consumer Services Sector

• Genuine Parts Company (GPC)
  Yield: 4.19% | Style: Mid Value | Analysis
• Sysco Corporation (SYY)
  Yield: 3.56% | Style: Large Core | Analysis
• McDonald’s Corporation (MCD)
  Yield: 3.22% | Style: Large Core | Analysis

Energy Sector

• BP Plc ADR (BP)
  Yield: 6.15% | Style: Large Value
• Chevron Corporation (CVX)
  Yield: 3.75% | Style: Large Value
• ExxonMobil Corporation (XOM)
  Yield: 2.56% | Style: Large Value

Financial Services Sector

• Harleysville Group Inc. (HGIC)
  Yield: 3.90% | Style: Small Value | Analysis
• Chubb Corporation (CB)
  Yield: 2.85% | Style: Large Value | Analysis
• Aflac Inc. (AFL)
  Yield: 2.38% | Style: Large Core | Analysis

Hardware Sector

• Diebold Incorporated (DBD)
  Yield: 3.67% | Style: Small Value
• Linear Technology (LLTC)
  Yield: 3.23% | Style: Mid Core
• Raven Industries Inc. (RAVN)
  Yield: 1.90% | Style: Small Growth | Analysis

Health Care Sector

• Meridian Bioscience Inc. (VIVO)
  Yield: 3.27% | Style: Small Growth
• Johnson & Johnson (JNJ)
  Yield: 3.08% | Style: Large Core | Analysis
• Cardinal Health Inc. (CAH)
  Yield: 2.10% | Style: Large Core | Analysis

Industrial Materials Sector

• Nucor Corp. (NUE)
  Yield: 3.40% | Style: Large Core | Analysis
• Emerson Electric Co. (EMR)
  Yield: 2.90% | Style: Large Core | Analysis
• 3M Company (MMM)
  Yield: 2.58% | Style: Large Core

Media Sector

• McGraw-Hill Companies Inc. (MHP)
  Yield: 2.63% | Style: Large Core

Pharmaceuticals Sector

• Eli Lilly & Company (LLY)
  Yield: 5.77% | Style: Large Value
• Abbott Laboratories (ABT)
  Yield: 2.97% | Style: Large Growth | Analysis

Real Estate Sector

• Essex Property Trust (ESS)
  Yield: 5.14% | Style: Mid Core
• Corporate Office Properties Trust Inc. (OFC)
  Yield: 4.29% | Style: Mid Core
• Federal Realty Investment Trust (FRT)
  Yield: 4.06% | Style: Mid Core

Telecommunications Sector

• CenturyLink Inc. (CTL)
  Yield: 8.10% | Style: Large Value
• AT&T Inc. (T)
  Yield: 6.54% | Style: Large Value | Analysis

Utilities Sector

• Integrys Energy Group Inc. (TEG)
  Yield: 6.61% | Style: Mid Value
• Consolidated Edison Company (ED)
  Yield: 5.59% | Style: Large Value
• MGE Energy Inc. (MGEE)
  Yield: 4.45% | Style: Small Core

Bonds

• Vanguard Short-Term Bond ETF (BSV)
  Yield: 2.74% | Style: Short-Term Bond
• Vanguard Intermediate-Term Bond ETF (BIV)
  Yield: 4.32% | Style: Intermediate-Term Bond
• Vanguard Long-Term Bond ETF (BLV)
  Yield: 5.16% | Style: Long-Term Bond

Needless to say, the above will not provide a perfect allocation, but it goes a long way to provide diversity in a portfolio focused only on income securities. In my personal portfolio, I buy the best available dividend securities and use my other investments to balance my asset allocation.

Full Disclosure: Long ABT, ADP, AFL, BIV, BLV, BP, CLX, CTL, CVX, ED, EMR, GPC, HGIC, JNJ, KO, LLY, MCD, MMM, NUE, PG, SYY, T, TEG. See a list of all my income holdings here.

(Photo Credit)

#10 Chubb Corp. (CB) One of the largest U.S. property-casualty insurers, Chubb has carved out a number of niches, including high-end personal lines and specialty liability lines coverage.
Paid since: 1902 | Consecutive increases: 45 | Yield: 2.92%

#9 PPG (PPG) is a leading manufacturer of coatings and resins, flat and fiber glass, and industrial and specialty chemicals.
Paid since: 1899 | Consecutive increases: 36 | Yield: 3.55%

#8 Colgate-Palmolive Company (CL) is a consumer products company, whose products are marketed throughout the world. Colgate’s Oral Care products include toothpaste, toothbrushes, oral rinses, dental floss and pharmaceutical products.
Paid since: 1895 | Consecutive increases: 45 | Yield: 2.13%

#7 The Coca-Cola Company (KO) is the world’s largest soft drink company. It engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates, fruit juices and syrups worldwide.
Paid since: 1893 | Consecutive increases: 47 | Yield: 3.02% | [Analysis]

#6 The Procter & Gamble Company (PG) is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries.
Paid since: 1891 | Consecutive increases: 53 | Yield: 2.92% | [Analysis]

#5 UGI Corp. (UGI) operates propane distribution, gas and electric utility, energy marketing and related businesses through subsidiaries.
Paid since: 1885 | Consecutive increases: 23 | Yield: 3.20%

#4 Consolidated Edison, Inc. (ED), through its subsidiaries, provides electric, gas, and steam utility services in the United States serving parts of New York, New Jersey and Pennsylvania.
Paid since: 1885 | Consecutive increases: 36 | Yield: 5.42%

#3 Eli Lilly and Company (LLY) discovers, develops, manufactures and sells prescription drugs that offers a wide range of treatments for neurological disorders, diabetes, cancer, and other conditions. The company also sells animal health products.
Paid since: 1885 | Consecutive increases: 42 | Yield: 5.52% | [Analysis]

#2 Exxon Mobil Corp. (XOM) is engaged in the exploration, production, and sale of crude oil, natural gas, petroleum products and petrochemicals. XOM is the world’s largest publicly owned integrated oil company.
Paid since: 1882 | Consecutive increases: 27 | Yield: 2.51%

#1 Stanley Works (SWK) is a worldwide producer of tools, hardware and specialty hardware for home improvement, consumer, industrial and professional use.
Paid since: 1877 | Consecutive increases: 42 | Yield: 2.44%

A strong dividend culture is a great place to start looking, but before buying we must also consider other factors such as: dividend fundamentals, ability to cover their dividend and fair value.

Full Disclosure: Long KO, PG, ED, LLY. See a list of all my income holdings here.

(Photo Credit)

This week a large number of companies chose to step up and reward their investors with higher cash dividends:

Enterprise Bancorp (EBTC) provides various banking products and services in Massachusetts and New Hampshire. January 19th the company increased its quarterly dividend 5.3% to $0.10/share. The dividend is to be paid on March 1, 2010 to shareholders of record as of February 8, 2010. The ex-dividend date is February 4, 2010. The yield based on the new payout is 3.80%.

ONEOK Partners (OKS) is a leading transporter of natural gas and natural gas liquids (NGLs) in the Mid-Continent area to market centers in the U.S. January 20th the partnership raised its quarterly distribution to $1.10/unit. The distribution is payable Feb. 12, 2010, to unitholders of record as of Jan. 29, 2010. ONEOK Partners has increased its distribution by more than 38 percent since April 2006, when a wholly owned subsidiary of ONEOK, Inc. (NYSE: OKE) became general partner. The yield based on the new payout is 6.67%.

McGraw-Hill (MHP) is a leading information services organization serving worldwide markets in education, business, industry, other professions and government. January 20th the company boosted its quarterly dividend 4.4% to $0.235/share. The dividend is payable on March 10, 2010, to shareholders of record on February 24, 2010. MHP is a Dividend Aristocrat and has raised its dividend for 37 consecutive years. The yield based on the new payout is 2.88%.

Omega Healthcare (OHI) is a real estate investment trust that invests in and provides financing to the long-term care industry with health care facilities in 27 states. January 20th the company increased its quarterly dividend to $0.32/share. The dividend is to be paid February 16, 2010 to common stockholders of record on January 29, 2010. The ex-dividend date is January 27, 2010. The yield based on the new payout is 6.42%.

Tiffany (TIF) is a leading international retailer, designer, manufacturer, and distributor of fine jewelry and gift items. January 21st the company raised its quarterly dividend by 18% to $0.20/share and announced it will resume share buybacks. The new dividend is effective with the next payment in April. The yield based on the new payout is 1.92%.

Washington Post (WPO) publishes The Washington Post newspaper and Newsweek magazine, operates TV stations and cable systems, and provides education and database services. January 21st the company bumped its quarterly dividend $2.25/share. The dividend is payable on February 5, 2010, to shareholders of record on January 25, 2010. The yield based on the new payout is 2.01%.

Family Dollar (FDO) operates a chain of more than 6,650 retail discount stores in 44 states across the U.S. January 21st the company increased its quarterly dividend 14.8% to $0.155/share.The dividend is payable Thursday, April 15, 2010, to shareholders of record at the close of business on Monday, March 15, 2010. FDO is a Dividend Aristocrat and has raised its dividend for 34 consecutive years. The yield based on the new payout is 2.01%.

Wesco Financial (WSC) engages in three principal businesses through its subsidiaries: insurance, furniture rental, and steel services. January 21st the company increased its quarterly to $0.41/share. The dividend is payable March 4, 2010 to shareholders of record at the close of business on February 4, 2010. The ex-dividend date is February 2, 2010. WSC is a Dividend Achiever and has raised its dividend for 38 consecutive years. The yield based on the new payout is 0.46%.

Polaris Industries (PII) manufactures snowmobiles, all-terrain vehicles, motorcycles, and related accessories for recreational and/or utility use. January 21st the company raised its quarterly dividend 3% to $0.40/share. The dividend is payable on February 16, 2010 to shareholders of record at the close of business on February 1, 2010. PII is a Dividend Achiever and has raised its dividend for 15 consecutive years. The yield based on the new payout is 3.61%.

Spectra Energy Partners (SEP) transports natural gas through interstate pipeline systems, and stores natural gas in underground facilities in the United States. January 21st the partnership boosted its quarterly distribution 2.5% to $0.41/unit. The distribution is payable on February 12, 2010, to unitholders of record at the close of business on February 2, 2010. The yield based on the new payout is 5.40%.

Pall Corp (PLL) is a leading producer of filters for the health care, aerospace, microelectronics, and other industries. January 21st the company increased its quarterly dividend to $0.16/share. The dividend is payable on February 23, 2010 to shareholders of record as of February 9, 2010. The ex-dividend date is February 5, 2010. The yield based on the new payout is 1.75%.

Consolidated Edison (ED) is an electric and gas utility holding company serving parts of New York, New Jersey, and Pennsylvania. January 21st the company raised its quarterly dividend to $0.595/share. ED is a Dividend Aristocrat and has raised its dividend for 36 consecutive years. The yield based on the new payout is 5.22%.

Finish Line (FINL) is a mall-based specialty retailer. January 21st the company bumped it quarterly dividend to $0.04/share. The dividend is payable March 15, 2010 to shareholders of record as of February 26, 2010. The ex-dividend date is February 24, 2010. The yield based on the new payout is 1.38%.

Although growing its dividend is important, to be a great dividend stock a company must do it on a consistent basis. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: No position in the aforementioned securities. See a list of all my income holdings here.

(Photo Credit)

Online Cash Receipts are the collected earnings from my online endeavors. Most of which is advertising on the my various blogs. The year-to-date $147.40 Online Expenses relates to registering 3 domains (DividendsValue.com, Dividends4Life.com and TheDiv-Net.com) and paying my annual hosting fee. The Interest Income line is interest earned on cash balances in an ING account I set up for the PCP. The Gain/(Loss) line is for market changes to the PCP (realized and unrealized). December Dividends of $76.24 included:

• $8.11 Vanguard Intermediate-Term Bond (BIV)
• $9.44 from Vanguard Long-Term Bond ETF (BLV)
• $8.82 Johnson & Johnson (JNJ)
• $16.80 BP plc (BP)
• $8.71 Emerson Electric Co. (EMR)
• $15.34 Consolidated Edison Inc. (ED)
• $9.02 The Coca-Cola Company (KO)

The portfolio was up in December, for the year and since its inception. Online earnings in December once again surpassed the $3,000 mark. A large portion of the increase is related to the strong interest in D4L-Premium Services. The premium service has continued grow each month. Traffic on Dividend Value set a record in December, breaking the previous record set in October 2009.

During the month of December, I purchased the following securities:

• 34 shares McDonald’s Corp. (MCD) providing $74.80 in annual dividend earnings
• 16 shares Johnson & Johnson (JNJ) providing $31.36 in annual dividend earnings
• 40 shares PowerShares Emerging Markets Debt (PCY) providing $64.40 in annual dividend earnings

Including the above December purchases, my annual PCP dividend income is now $688.68 at the current dividend rates. I ended the month with $3,395.78 in cash, enough to purchase two or three stocks in January. Through December, I have purchased 13 stocks this year, including at least one in the last eight consecutive months. I continue to believe the current cash balance and recent earnings will support the purchase of at least one stock each month.

My PCP holdings are always available by selecting the Holdings option from the menu in the header. The next PCP update will be mid-February.

(Photo: sanja gjenero)

High-yield investing often carries a greater degree of risk than I am willing to accept. Recently, a reader alerted me to an article describing a 20-year study by the Schwab Center for Financial Research demonstrates that investments with the highest yields don’t necessarily provide the highest returns and offers a safer way to implement a high-yield approach. Here are some key excerpts from the article:

• Stocks with the highest dividend yield haven’t provided the best total return.
• Research found the highest-yielding stocks had twice as many dividend cuts as the other dividend-paying groups.
• Price momentum is a stock indicator based on the idea that stocks that have been outperforming in the past will continue to do so.
• A simple screen using the six-month price momentum strategy applied to the highest-yielding stocks can help you pick the best performers.
• The screen is implemented using:
  • Stocks in the S&P 500, 400 and 600 indexes.
  • Dividend Yield and click the dividend yields greater than 1.5 times the S&P 500 yield.
  • Capture analyst ratings.
  • 6 Months Price Performance > Price Change.
  • Sort by price performance and select the highest analyst ranked  stocks within the top 45.

Since the article was very Schwab specific, I tried to generalize the above screen. If you have a Schwab account, please refer to the article for more specific instructions.

So, what does all this mean? If you are an income investor that enjoys trading instead of buy and hold, then this may be something you want to explore further.  However, the 11.5% earned with this strategy vrs. the  10.73% for dividend stocks not in the highest yielding group hardly seems worth the effort.

For me, I will continue to focus on high-quality dividend stocks at lower, but growing,  yields. However, for those looking to bump their yield a little, below are several Dividend Aristocrats and Achievers that are currently yielding more than 5%:

CenturyLink Inc. (CTL) – Aristocrat – Yield: 8.6%
Lilly Eli & Co. (LLY) – Aristocrat – Analysis -Yield: 6.0%
Integrys Energy Group Inc. (TEG) – Aristocrat – Yield: 7.8%
Consolidated Edison Inc. (ED) – Aristocrat – Yield: 5.8%
Progress Energy Inc. (PGN) – Achiever – Analysis – Yield: 6.5%
Realty Income Corp (O) – Achiever – Yield: 7.1%
Health Care Property Investors, Inc. (HCP) – Achiever – Yield: 6.8%
Cincinnati Financial Corp. (CINF) – Aristocrat – Yield: 6.2%
Leggett & Platt Inc. (LEG) – Aristocrat – Analysis – Yield: 5.7%
Pitney Bowes Inc. (PBI) – Aristocrat – Yield: 6.0%
AT&T Inc. (T) – Achiever – Yield: 6.2%
Black Hills Corp. (BKH) – Achiever – Yield: 5.8%
Capital City Bank Group (CCBG) – Achiever – Yield: 5.6%
Universal Health Realty Income Trust (UHT) – Achiever – Yield: 7.5%

This by no means is an endorsement of the above stocks. If you are looking for high-yields, you might lower your risk some by looking at a pool of stocks that have a long history of increasing their dividends.

Full Disclosure: Long CTL, LLY, TEG, ED, PGN, O, HCP . See a list of all my income holdings here.

(Photo: Steve Woods)