The other night, after we were done predicting how many touchdowns the Ravens would beat the Eagles by on Sunday (the consensus was four), the conversation turned to stock-picking and the markets. The main subject once again was dividend investing with a focus on dividend-growth stocks. The theory that buying stocks with a solid history of raising their dividend will beat the market is sound. As always, the price-value equation does matter, but for the most part, dividend growth is a solid approach for defensive investors. A solid history of dividend payments was one of Ben Graham's seven principles of defensive stock selection.
When the talk turns to dividend growth, I always hear the same names. Fund managers, talking heads and many of my associates talk about the big blue chip names, including drug companies such as Merck (MRK) and Johnson & Johnson (JNJ). The utilities are mentioned and, sooner or later, someone will bring up Wells Fargo (WFC) as the bank with the best potential for dividend growth in the years ahead. IBM (IBM) and McDonalds (MCD) are usually mentioned given their strong franchises and reliable history, or raising the dividend. All of these are solid conventional choices, but I find it useful to look deeper and kick over a few rocks looking for solid dividend growers....417 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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