The more things change, the more they stay the same. We are undergoing tremendous changes in government, the tax system, and even in our lives. Everything seems to be getting faster. Even the stock market is not immune to the rapid-fire changes taking place.
Despite the all the changes, the one thing that remains the same is the process of identifying the best dividend stocks. It's a straightforward and consistent formula that is not affected by high-frequency trading, computer algorithms, or any of the other newfangled trading strategies.
When it comes to identifying the best dividend stocks of 2017, the same criteria that have worked for decades can be used. It doesn't matter who the President is, the state of the economy, or even how high or low the Dow moves.
If you have not started on your path to creating a passive income from the stock market, don't worry, it's not too late. Even during this year's craziest days, you can still find incredible value and reliable income.
Identifying Quality Income Stocks
The first sign of a top-notch dividend-payer is consistency in paying dividends. Earning a consistent dividend over time is far more valuable than a high but irregular dividend payment. The reason for this is the power of dividend reinvestment. Consistently reinvesting a steady dividend allows compound interest to work in your favor.
Second, the best dividend stocks have a history of steadily increasing payments. A history of habitually increasing dividends is a good indicator of future performance. But this doesn't mean a few recent increases. Rather, years of consistent dividend increases are required for a stock to make the list.
Third, look for what supports the yield. Unsustainably high dividend payments can signal trouble for a company. It's important to understand that struggling businesses can juice their dividend payments to attract interest. Naïve, high-payout-only-focused investors often fall for this type of chicanery.
Another thing that must be understood is that yield is a function of stock price. In many cases a high, or even increasing, yield is the result of a steadily declining share price. Remember, all things being the same, as the share price drops, yield increases. Be certain that the increasing yield is not the result of a steady decrease in price!
Finally, check for steady earnings and cash flow. Both should be increasing over time. The ability to pay consistent dividends comes from earnings and cash flow at the company. If these metrics are decreasing or unsteady, it can be a major warning signal to avoid the stock. Remember, it is best to look at cash flow and earnings over the long term. Year-over-year numbers paints a much more accurate figure, for long-term income investors than a quarter-by-quarter analysis.
2017's 3 Most Promising Dividend Payers
1. CR Bard (NYSE: BCR)
This medical supply company has increased its dividend for 45 straight years. It has also improved earnings per share by an average of nearly 11% each year over the last decade.
Share prices have ramped higher by almost 37% in 2017 on the back of reliable results. The latest quarter was no exception, showing a profit of $2.37 per share while earnings, adjusted for amortization costs and non-recurring costs, beat estimates at $2.87 per share.
Despite the company currently yielding under 1% due to the rocketing share price, it is a great addition to your portfolio.
2. Leggett & Platt (NYSE: LEG)
Yielding just over 2.5% annually, this manufacturing company has increased its dividends annually for over four decades. Launched in 1883 as a mattress maker, LEG has grown into an international, diversified company with 130 factories spread across 19 countries.
Earnings per share have increased by a steady 4% compounded annually over the last 10 years. Bullish results are continuing, with the company recording first-quarter net income of $86 million to beat analyst's estimates.
What has me very bullish on this stock is that the company plans to increase earnings by 10% and sales by 7% annually going forward into 2019. These projections are based on acquisitions and organic growth, not just pie in the sky targets.
3. Federated Realty Trust (NYSE: FRT)
This real estate investment trust (REIT) boasts the longest record in the sector for dividend growth. With 49 consecutive years of dividends hikes, this retail space REIT stands above the rest.
REITs are required to give back 90% of their earnings as dividends, making Federated a healthy choice for our list of the best dividend stocks of 2017 and for the years to come.
Yielding right at 3%, the REIT is trading lower by nearly 7% this year due to negative sentiment in the retail space. However, Federated continues to deliver reliable results. In 2016, the company grew its total revenue 7.7% to a record $802 million through higher rents and newly developed and acquired real estate placed in service. Net income available for common shareholders ramped higher by $40 million to a record $249 million.
At the same time, funds from operations came in at $406 million, resulting in per share growth of 6.2% to a record $5.65 per share. These numbers make it clear that the REIT's stellar record should continue long into the future despite the current negative sentiment.
Risks To Consider: Even the most reliable dividend payers are susceptible to investor sentiment and the overall market climate. That said, the companies listed above have weathered economic storms before and there's little to suggest they won't be able to handle whatever the rest of 2017 throws at them.
Action To Take: Consider adding these reliable dividend payers to your portfolio. Remember to allocate no more than 2% of your portfolio to any one security.
Editor's Note: If you invested $10,000 into one unexpected group of stocks in 1972, you'd have $457,791 in your pocket in 2015. But if you put $10k into their counterparts instead, you'd have just $30,153. The only difference between these 2 choices is... Get the full story.