Earlier this month, The Associated Press reported that large companies are increasing their dividends by amounts previously unseen in history. Simultaneously, an analyst unveiled that S&P 500 companies are holding a record $940 billion in cash.
I'm currently positioning my portfolio to profit from this unprecedented event, and in the next four minutes, I will show you how to do the same. Get ready to do something extraordinary.
What's at stake?$16.6 billion! That's the amount S&P analyst Howard Silverblatt is reporting S&P 500 companies are increasing their dividends. That's spread across 117 different companies. Today, I'm revealing my five favorites of the group and also sharing with you how to get free access to 13 more outstanding dividend payers identified by The Motley Fool's expert analysts.
The dividend bonanza of 2011I won't waste your valuable time with a long-winded explanation of why dividend growth is important. Just know that by buying stocks with a consistent history of increasing dividends, you position yourself for increasingly massive payouts in the future. As a quick example, if you buy a stock that pays a dividend of 2.5%, and it increases its payout by a compounded 20% per year, you'd have an whopping 15.5% yield on your original investment in a mere 10 years.
Imagine getting a 20% raise each and every year. That's a life-changing payout that I'm planning to take part in; by the end of this article you should do the same.
The absolute best dividend growersIn order to find the best fast-growing dividend payers, I carefully sorted through the companies announcing sizable dividend hikes and handpicked five that best met these qualifications:
- I believe in the long-term viability of the business.
- Announced a substantial dividend increase this year.
- Long history of sustainably increasing dividends.
Deep consumer valueThe first two companies turbo-charging their dividends are discounters TJX Cos. (NYSE: TJX ) , more commonly known by its major brands T.J. Maxx and Marshalls, and Ross Stores(Nasdaq: ROST ) . Discount retail has been an obvious choice throughout the recession, and I strongly believe the industry will continue to thrive.
With dividend boosts of 27% and 38%, respectively, these companies are indicating that they're more than happy for shareholders to own their shares through the 2011 dividend bonanza. And none of this is new for either of these companies. They've both increased their dividends year after year since the mid-90s. Talk about consistency you and I can rely on!
The venerable retail legendNext is a retailer we've all known about for years. The stock has underperformed the S&P over the past 10 years but has continued to boost its dividend at a compounded 17% per year. And this year it's accelerating that increase -- to shareholders' benefit. I'm talking aboutWal-Mart (NYSE: WMT ) , which has indicated it's boosting the dividend by a whopping 21%.
I'm willing to give Wal-Mart time to get its local and international act together. All the while, I'll be profiting from its ever-higher dividend.
A unique dividend playNext is Hasbro (Nasdaq: HAS ) , an oddity in a dividend portfolio, but one I personally own for its outstanding intellectual property and history of dividend increases. Hasbro is not disappointing me this year. It's pumping the dividend up by 20% -- something I'm excited to see as I watch it turn its library of content into movies and new media games. I think of it like a pre-acquisition Marvel that has given shareholders a 17% annual raise (via compounded dividend increases) over the past 10 years.
Tech and dividends -- a winning combinationMy last pick of the five is a mobile device play recommended to me by Motley Fool's Rising Tech Star, Eric Bleeker. Tech companies are well-known cash hoarders, though networking giant Cisco (Nasdaq: CSCO ) has recently instituted a $0.06 (1.4%) dividend to begin paying out some of its $40 billion in cash.
Instead of waiting for other tech giants to begin returning cash to shareholders, I'm tappingQualcomm (Nasdaq: QCOM ) for its leadership in mobile processors and unmatched patent portfolio in the space. It's been paying a dividend since 2003 and has steadily boosted it along the way. While its current-year increase is the smallest of the companies I've mentioned, I'm most excited about the future growth prospects of the underlying business.
Here's a quick summary of the companies I've mentioned, but feel free to skip to below the table.
Company | Current Yield | 5-Year Dividend CAGR | Percentage Dividend Increase Announced |
|---|---|---|---|
| TJX | 1.5% | 20% | 27% |
| Ross Stores | 1.2% | 26% | 38% |
| Wal-Mart | 2.8% | 15% | 21% |
| Hasbro | 2.6% | 22% | 20% |
| Qualcomm | 1.4% | 17% | 13% |
Source: Capital IQ, a division of Standard & Poor's.
Some of those current yields may not impress you, but I urge you to compare the high-velocity nature of their dividends next to others in the market. For 13 fantastic comparison companies, keep reading below.
Don't delay! Stake your claim -- here's howWith almost $17 billion in new dividends coming onto the market, now is the perfect time to claim your share of the combined $940 billion in cash S&P 500 companies are sitting on. By looking to the companies that are aggressively hiking their dividends and have a long history of doing so, you set yourself up for success now and over the next few decades.
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