Investors who need a reminder of why dividends are desirable should be getting it in spades this year, thanks to extreme market volatility. The price of the S&P 500 Index is barely at breakeven year-to-date, while income from dividends is at roughly $25 per share.
Most of us buy stocks expecting prices to go up, which doesn't always happen. But the one aspect of stock investing that's actually predictable is dividends. In addition to providing a reliable source of income, dividends can be reinvested to build wealth over time.
With a little research, you can find dividend-paying stocks that offer attractive yields and dividend increases for many years in a row. Here are five consistent high-yielding stocks that raised dividend rates this month. If you buy these stocks now, then you can take advantage of higher dividend rates in January.
1. First PacTrust Bancorp (Nasdaq: BANC)
First PacTrust is the holding company for Pacific Trust Bank, a community bank with a 70-year history of profitability. The bank operates 11 branch locations in San Diego, Los Angeles and Riverside counties in California.
The company's year-over-year earnings nearly tripled to $2.75 million in the nine months ended Sept. 30, while earnings per share (EPS) jumped 59% to $0.27 in the same period. This growth reflects increases in total assets and deposits, not to mention a sizable 60% decline in nonperforming loans, to a current $8.3 million. Analysts say First PacTrust will likely produce 15% yearly earnings growth in the next five years.
Like many banks during the financial crisis, First PacTrust was forced to cut its dividend (in this case, by half), but the old $0.40 annual dividend was restored last year. This month, First PacTrust raised the dividend by 4% to a $0.48 annual rate. The new dividend is payable Jan. 3, 2012, to shareholders of record on Dec. 16, 2011.
2. General Electric (NYSE: GE)
Forward yield: 4.1%
This diversified global infrastructure and finance company cut its dividend by two-thirds during the financial crisis, but started growing the dividend again last year with a boost to a current $0.48 annual rate.
GE is enjoying a surge in industrial orders, customer wins across its energy business and a strong recovery of GE Capital, its financial services business. The company has delivered six consecutive quarters of double-digit earnings growth. GE earnings rose 43% to $10.6 billion during the nine months ended Sept. 30, while EPS improved 38% to $0.88. Analysts look for 13% annual earnings growth from GE during the next five years.
GE increased the dividend 13% in December, marking it the fourth increase in two years. The new dividend is payable Jan. 25, 2012, to shareholders of record on Dec. 27, 2011.
3. RGC Resources (Nasdaq: RGCO)
Forward yield: 3.9%
RGC is a natural-gas utility serving roughly 57,000 customers across Virginia through operating subsidiaries that include Roanoke Gas Co., Diversified Energy Co. and RGC Ventures of Virginia. This steady performer has been paying dividends for more than 60 years.
RGC's earnings rose 3% from one year earlier to $4.65 million, or $1.01 per share in the fiscal year ended Sept.30 . This was mainly the result of increased natural-gas deliveries to industrial customers and a recent service rate increase.
In late November, RGC raised the dividend by 3% to a $0.70 annual rate. The new dividend rate will be paid on Feb.1, 2012, to shareholders of record on Jan.16, 2012.
4. Sysco Corp. (NYSE: SYY)
Forward yield: 3.7%
Sysco distributes food products to restaurants, health care and educational facilities, and hotels. The company operates 177 distribution facilities serving about 400,000 customers and generates more than $39 billion in annual sales. Sysco has increased dividends 43 times in 40 years.
In the past five years, earnings have grown roughly 8% a year. Although earnings were flat year-over-year at $1.2 billion in the fiscal year ended July 2, 2011, EPS was 4% higher at $1.94 compared with $1.86 in 2010.
In November, Sysco hiked the dividend by 4% to a $1.08 annual rate. The new dividend is payable on Jan. 27, 2012, to shareholders of record on Jan. 6, 2012.
5. Pfizer (NYSE: PFE)
Forward yield: 4.2%
Pfizer is the world's largest drug maker, but shares have taken a beating this year due to the patent expiration of Lipitor, the company's top-selling cholesterol drug. Still, Pfizer has other drugs in the pipeline that will likely soften the blow, including Apixaban, an anti-coagulant that may be superior to existing treatments and addresses a $7 billion market.
Earnings growth for Pfizer is projected to slow to only 3% a year, but the trade-off is a 4% dividend yield. In December, Pfizer increased its dividend by 10% to an $0.88 annual rate. The new dividend rate is payable March 6, 2012, to shareholders of record on Feb. 3, 2012. The company has paid dividends for 73 years and posted 29 consecutive years of increases, before cutting the dividend in 2009 to pay for the Wyeth acquisition.
Risks to consider: A double-dip recession would hurt First PacTrust and GE. Pfizer may not be able to bring new drugs to market quickly enough to offset declining Lipitor sales.
Action to take--> My top pick within this group of stocks is GE, because of its impressive earnings and dividend growth, not to mention its solid position in so many industrial segments, including health care, infrastructure, technology, aviation and finances. I like Pfizer for its cash flow and yield, and RGC and Sysco for their consistent dividend-paying track records.