A dividend detective should use a stock list to find the best dividend companies. The best stocks are companies that have the ability to pay and grow their dividends over a long period of time. Your dividend growth & income strategy should include a dividend stock list. Lists such as the dividend aristocrats, achievers, champions, contenders, and challengers are a great place to begin investigating companies.
Best Dividend Companies
We will explore how to find the best dividend companies; but first we should ask why it’s important to find companies that consistently raise their dividend. Dividends provide income and receive favorable tax treatment. As companies grow earnings and raise their dividend the stock prices usually follow in the long run.
Dividends are also an important indicator of the value of a stock. A company that is able to consistently raise its dividend probably means they are consistently growing their earnings also. Growing dividends helps to identify well managed companies that have confidence in their future earnings. The companies that raise their dividend year after year are the best dividend companies.
Dividend Stock List
Using a stock dividend list is a great way to find those companies that consistently raise their dividend and then determine whether their price is low enough to warrant purchase. Remember, a company that consistently raises its dividend for long periods of time must also be increasing earnings. Each dividend stock list has its own requirements for making the list.
S&P Dividend Aristocrats
Aristocrats are a list of S&P companies that have raised their dividend for 25 consecutive years or more. These are the very best of the large company dividend payers. Their size and track record make them potential choices for those who want the safest stocks.
Dividend Achievers are a list of companies traded on US exchanges which have consistently raised dividends for at least 10 years. The larger universe of stocks and lower requirements provides a wider choice of still high quality dividend payers, particularly in the Mid-Cap and Small Cap areas.
Dividend Champions are a list of companies traded on US exchanges which have raised their dividend for 25 consecutive years or more. This list is similar to Dividend Aristocrats but with more choices of small and mid-cap stocks.
Dividend Contenders are a list of companies traded on US exchanges which have raised their dividend for at least 10 consecutive years but less than 25 years. This list is similar to the Dividend Achievers list. Here you will find great companies that don’t have quite the long term record of companies on the Dividend Champions List.
Dividend Challengers are a list of companies traded on US exchanges which have raised their dividend for at least 5 consecutive years but less than 10 years. Here you find companies that only have an excellent short term record, but don’t pass this one up. Some of these companies are not as mature but have the potential to be Dividend Contenders and Champions in the future.
Is the Price Right?
The value investor will always want to consider the margin of safety and intrinsic value of a stock because the price you pay matters greatly when buying a dividend stock. The best clue I can give you is, once you find these companies, have the discipline and patience to buy them at the right valuation.
Being a dividend detective is hard work, but a dividend stock list can be a great place to find the best dividend companies for your investment portfolio. I like to maintain a stock buy list of companies that meet my standards and buy them when their prices fall to bargain levels. Remember, just because a company is one of the best does not mean it is priced right for inclusion in your portfolio.
Related Reading: 5 Value Strategies For Asset Allocation