S&P 500 High Dividend Paying Stocks

Are you investing in quality, dividend paying stocks, either by buying individual stocks or investing in dividend oriented mutual funds or ETFs (exchange traded funds)?

Why Invest in Dividend Stocks?

If you are not, then I ask you to take a look at this chart from the S&P. It’s the cumulative return of $1 invested in 1930 with two different investment schemes. The red line is the return with dividend reinvestment and the blue one is price return only. As you can see, the difference between the two is huge, because of the compounding effect of dividend income.

S&P Cumulative Return 1930 - 2007

The whole deal about dividend reinvestment is that when dividend is distributed, you don’t take the cash distribution. Instead, you use the dividend to buy more shares of the stock. Over time, even without any new contribution, you will own more shares from the reinvestment, as long as the dividend keeps coming and you keep reinvesting it.

Does the above chart interest you? I hope it does :)

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How to Invest in Dividend Paying Stocks?

Now you know dividend can make a difference in the long term, the next question is where to find best dividend-paying stocks to invest? You have a couple of options.

First, if you want to buy individual stocks, then the recently published S&P 500 Dividend Aristocrats (PDF file) is a  source to get you started. In Class of 2009, S&P selected 52 stocks from the index which have increased their dividends every year for at least 25 consecutive years. The full list of 52 dividend aristocrats is shown in the following , where I also added each stock’s dividend yield and current price (as of 01/13/09). To invest in individual stocks, you can either use cheap brokers such Zecco (10 zero commision trades per month) , which does offer free dividend reinvestment, or buy them through a DRIP program.

Company Symbol Sector Yield Current Price
3M Company MMM Industrials 3.50% $56.25
Abbott Labs ABT Health Care 2.80% $50.06
AFLAC Inc. AFL Financials 2.60% $40.17
Air Products & Chemicals APD Chemicals Materials 3.10% $56.22
Archer-Daniels-Midland ADM Consumer Staples 1.90% $27.88
Automatic Data Processing Inc. ADP Information Technology 3.40% $38.92
Avery Dennison Corp. AVY Industrials 5.20% $30.56
Bard (C .R.) Inc. BCR Health Care 0.80% $84.72
BB&T Corporation BBT Financials 8.20% $22.35
Becton, Dickinson BDX Health Care 1.90% $72.04
Bemis Co. BMS Materials 3.70% $23.21
Century Telephone CTL Telecomm Services 10.10% $27.13
Chubb Corp. CB Financials 2.90% $44.60
Cincinnati Financial CINF Financials 5.60% $27.22
Clorox Co. CLX Consumer Staples 3.50% $52.53
Coca Cola Co. KO Consumer Staples 3.40% $44.02
Consolidated Edison ED Utilities 5.90% $39.58
Dover Corp. DOV Industrials 3.00% $32.16
Emerson Electric EMR Industrials 3.70% $34.34
Exxon Mobil Corp. XOM Energy 2.10% $77.92
Family Dollar Stores FDO Consumer Discretionary 1.80% $27.95
Gannett Co. GCI Consumer Discretionary 18.60% $8.07
General Electric GE Industrials 7.80% $14.94
Grainger (W.W.) Inc. GWW Industrials 2.10% $76.23
Integrys Energy Group TEG Utilities 6.10% $43.22
Johnson & Johnson JNJ Health Care 3.10% $58.84
Johnson Controls JCI Consumer Discretionary 2.70% $17.78
Kimberly-Clark KMB Consumer Staples 4.60% $52.23
Legg Mason LM Financials 4.10% $22.52
Leggett & Platt LEG Consumer Discretionary 6.90% $14.23
Lilly (Eli) & Co. LLY Health Care 5.10% $38.52
Lowe’s Cos. LOW Consumer Discretionary 1.60% $20.30
M&T Bank Corp. MTB Financials 5.80% $47.00
McDonald’s Corp. MCD Consumer Discretionary 3.30% $59.32
McGraw-Hill MHP Consumer Discretionary 3.70% $22.82
PepsiCo Inc. PEP Consumer Staples 3.20% $52.23
Pfizer, Inc. PFE Health Care 7.30% $17.59
Pitney-Bowes PBI Industrials 5.20% $25.32
PPG PPG Industries Materials 4.90% $41.70
Procter & Gamble PG Consumer Staples 2.70% $59.47
Questar Corp. STR Utilities 1.40% $33.50
Rohm & Haas ROH Materials 2.60% $59.47
Sherwin-Williams SHW Consumer Discretionary 2.40% $58.65
Sigma-Aldrich SIAL Materials 1.40% $38.29
Stanley Works SWK Consumer Discretionary 3.70% $33.80
State Street Corp. STT Financials 2.30% $38.86
Supervalu Inc. SVU Consumer Staples 3.90% $17.87
T arget Corp. TGT Consumer Discretionary 1.80% $34.94
U.S. Bancorp USB Financials 7.60% $22.19
V.F. Corp. VFC Consumer Discretionary 4.50% $50.74
Walgreen Co. WAG Consumer Staples 1.70% $26.07
Wal-Mart Stores WMT Consumer Staples 1.80% $52.12

If, on the other hand, you don’t want to own individual stocks because of the volatility and risk, then another options is investing in exchange-traded funds (ETFs) specializing in catching dividends. A while ago, I discussed how to use dividend paying ETFs to generate passive income. Check out that post to see which ETF has be best dividend yield. That post does need an update, though.

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9 Responses to “S&P 500 High Dividend Paying Stocks”

  1. Manshu |  Jan 14, 2009 at 10:48 am

    The key aspect of looking at dividends yields is that the yield shouldn’t be high because of a beating that the price of the stock has taken.

  2. Sun |  Jan 14, 2009 at 2:53 pm

    Manshu: Yes,you can’t just look at dividend yield, which is related to the stock price. The dividend history of a stock can tell you much more on how the company is doing in terms of dividend payout. And if a company can increase its dividend payment every year for 25 years, that’s good and that’s what the aristocrats are about :)

  3. Writer's Coin |  Jan 15, 2009 at 7:01 am

    Right now is a weird but great time to have stocks that pay dividends, but a lot of their yields will be out of wack and will have to be adjusted. Even their history of never cutting dividends or any of that might change. This is one of those “black swan” type events, so I wouldn’t guarantee anything at this point. But for sure, dividends need to be in people’s portfolios. The chart says it all.

  4. FI |  Feb 17, 2010 at 6:54 pm

    Interesting. It can be difficult to find sector-specific information in the news today—but a recent book written by a client of mine is dedicated entirely to the Consumer Staples sector: http://consumerstaples.fisherinvestments.com/. It covers everything from a background on the sector and its various industries to investing techniques.