Stock Watch


12 Stocks to Get Dividends Every Month

Jeffrey R. Kosnett

We found a dozen great stocks with a payment schedule that will line your pockets with cash all year.



SEE DIVIDENDS EVERY MONTH IN SLIDES

January

General Electric (symbol GE) price: $21, yield 2.6%
The diversified giant known as "Eclectic" has been reinventing itself since Thomas Edison's time. Now, GE is remaking itself as the developing world's go-to source for engines and turbines while remaining a global leader in high-end medical devices and energy-related capital equipment. The Fairfield, Conn., firm is shifting away from media and financial services. GE sold control of NBC Universal to Comcast, and its finance arm, which nearly sank the whole ship, is recovering but produces only one-sixth of the company's profits.

In any case, diversified manufacturers are generally more consistent sources of dividends than television networks and financial engineers, so you can be confident that GE's pledge to rebuild its dividend, which it slashed by two-thirds in 2009, is genuine. A boost in 2010 and another this year have brought the annual rate back to 56 cents, up from 40 cents per share annually. More raises are likely this year and beyond.
Also pays in: April, July and October

(Dividend-paying stocks can help your portfolio through volatile markets. Watch our video for more tips on Navigating Volatility in Your Portfolio.)

February

Aqua America (WTR) $23, 2.6%
February is a short month, so we'll cheat and make Aqua America, which pays on March 1, an honorary February dividend payer. Providing water is an essential service, and it's a business that earns a guaranteed profit margin. Water service is also a monopoly, or close to it -- even water purists who drink and cook with bottled H2O are likely to twist the tap for bathing.

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Aqua America, which serves about one million customers in 14 states, is the largest of the nation's dozen or so investor-owned water utilities. The Bryn Mawr, Pa., company's market capitalization of $3.2 billion exceeds the value of all other publicly traded water companies combined. Because of its girth, Aqua America can raise capital cheaply and use it to buy other water systems, usually from local governments that can't afford to maintain their systems. That enables Aqua America to raise dividends consistently, usually by about 4 cents per year.
Also pays in: June (first day), September and December

March

McDonald's (MCD) $76, 3.2%
The fast-food giant is a Dog of the Dow, one of the ten highest-yielding stocks in the Dow Jones industrial average. That's enough to get some love from dividend hounds. But unlike the other Dogs, McDonald's barks to celebrate its tail-wagging dividend increases. Over the past five years, the Oak Brook, Ill., company has raised dividends at an annualized rate of 30%, to a current $2.44 per share yearly.

McDonald's is a prodigious generator of cash. While other chains struggle to stay in business, McDonald's invents one hit product after another -- think breakfast servings of oatmeal and McCafe coffee drinks. More than half of sales and profits come from outside the U.S., so an investment in McDonald's shares effectively gives you exposure to all sorts of foreign currencies and lets you ride the rising spending power of hundreds of millions of consumers in fast-growing emerging markets.
Also pays in: June, September and December

April

Automatic Data Processing (ADP) $50, 2.9 %
Payroll processing may be a boring business, but few firms, whether they pay dividends or not, are as consistent as Automatic Data Processing. The company, one of a handful in the U.S. with a triple-A credit rating, processes payrolls, manages employee and business records, and runs IT departments under contract. The payroll business depends on the overall health of the economy in general and job growth in particular. Because the economy is expanding and the employment picture appears to be improving, this is a good time to invite ADP to send you a check every three months.

ADP's yield won't knock your socks off, but its dividends are ironclad -- the company holds $1.4 billion in cash and owes minimal debt. The low yield is also palatable because ADP boosts its dividends like clockwork -- 36 years in a row, to be precise. A modest rise in short-term interest rates will benefit ADP, which invests the payroll money it holds before transferring it to its clients' workers.
Also pays in: January, July and October

May

Verizon (VZ) $36, 5.4%
Before the Internet, the iPhone and Skype, Ma Bell was the phone company. Ma Bell, formally American Telephone & Telegraph, was tightly regulated and paid high dividends. The government broke up Ma Bell in 1984, accelerating a revolution in telecommunications that continues to this day. But when it comes to high dividends, it's back to the good old days, with two of Ma's offspring, Verizon and a new iteration of AT&T, each yielding better than 5%.

It's okay to buy both, but we prefer New York City-based Verizon. Verizon Wireless's deal to sell the iPhone is a game-changer, breaking AT&T's four-year stranglehold on the Apple bestseller. Analysts estimate that Verizon Wireless, 55% of which is owned by Verizon Communications, sold 500,000 iPhones on the first day its model went on sale. Verizon Wireless is spending heavily to promote the iPhone launch, and the result should be an expansion of its market-share lead in the U.S.
Also pays in: February, August and November

June

M&T Bank (MTB) $90, 3.1%
This Buffalo, N.Y., institution, organized in 1856, is the largest U.S. bank to have remained reasonably healthy during the 2008-09 financial crisis. The best evidence: M&T did not cut its dividend, which has stayed at an annual rate of $2.80 per share since the middle of 2007. Bank officials give two reasons for M&T's steadfastness.

First, M&T has a number of large shareholders (including Warren Buffett's Berkshire Hathaway) that have made it clear that they expect regular cash payments. The other is that because M&T remained profitable during the calamity, regulators had no need to press M&T to hack its dividend. M&T presciently bought a scandal-ridden Baltimore bank on the cheap in 2003 and used it to invade the booming Washington, D.C., region. The company hopes its pending buyout of Delaware's Wilmington Trust will further boost profits.
Also pays in: March, September and December

July

Kimberly-Clark (KMB) $66, 4.3%
The maker of Kleenex, Huggies and Scott paper products steers a steady financial course. The Dallas-based company maintains consistently high profit margins, carries a moderate amount of debt and tends to pay about half of its profits to shareholders.

Kimberly-Clark has lifted its payout 39 straight years, including an increase of 10% in 2010 and 6% so far this year. But while executives at some regular dividend boosters care more about the streak than their stock's yield, Kimberly's CEO, Tom Falk, has said that "our above-average dividend yield is important to us and distinguishes us among our peers." The stock's yield is higher than that of all consumer companies in the S&P 500. The outlook for 2011 is a tad iffier than usual because of soaring costs for the raw materials that Kimberly uses to make its products. So the company is mounting a preemptive cost-cutting plan that includes selling pulp mills and ceasing the manufacture of products for private labels.
Also pays in: January, April and October

August

Colgate-Palmolive (CL) $79, 2.7%
Colgate-Palmolive owns some of the world's best-known consumer brands -- among them, Colgate toothpaste and toothbrushes and Palmolive, Fab and Ajax cleaning products. And Colgate is a major player around the globe: The New York City-based company generates about 75% of its sales and earnings outside the U.S.; more than half of revenues and profits come from fast-growing emerging markets. It has 50% of the market in "oral care" (mostly toothpaste) in India and an even greater share in Brazil.

Colgate should be able to protect its profit margins by boosting prices enough this year to offset higher costs for raw materials. That, in turn, will allow it to hike its dividend for a 48th consecutive year (Colgate hasn't omitted a dividend since 1895). Colgate's yield isn't extraordinarily high, but the company has boosted its payout at an annualized rate of 13% over the past five years. Look for increases of that magnitude to continue for some time.
Also pays in: February, May and November

September

American Electric Power (AEP) $36, 5.1%
Electric utilities are practically synonymous with dividends, and every income investor should own at least one. Our pick is American Electric Power, a Columbus, Ohio, company that serves 5.2 million customers in 11 states in the Midwest and South. AEP also owns one of the world's biggest power-transmission networks, which collects tolls from wholesalers and other utilities that move electricity long distances.

AEP has everything you want in a top-notch power company. Its return on equity (a measure of profitability) is more than 10%, and the company generates power from a broad mix of fuel sources, including nuclear energy. Its stock boasts an above-average yield, and the payout ratio -- dividends as a percentage of earnings -- is a reasonable 60%, giving the company some flexibility to keep up the payments even if earnings fall a bit. After keeping the dividend rate in place for two years, AEP raised the payout twice in 2010, first by 2.4% and then by 9.5%.
Also pays in: March, June and December

October

Sysco (SYY) $28, 3.7%
From an investment perspective, the nation's leading distributor of food and related supplies to restaurants, schools, hospitals and other institutions behaves more like a utility because it generates steadily rising profits and dividends. Sysco holds an outsize 18% share of a $200 billion market in the U.S. and Canada, and it expects to expand that share by a half-percentage point annually for some time to come.

Earnings have been sluggish lately because the restaurant trade, which accounts for nearly 60% of sales, has been struggling and because costs are surging. But the Houston company runs a tight ship. As it buys smaller competitors and folds their accounts into its system, the increased efficiencies offset any shocks to the bottom line from such things as higher prices for sugar and diesel fuel. Sysco has boosted its dividend 41 straight years. It did so even in 2009, as a long string of consecutive years with earnings gains ended during the recession.
Also pays in: January, April and July

November

Realty Income (O) $35, 5.0%
With this high yielder, you don't have to wait three months between checks -- the Escondido, Cal., real estate investment trust pays out monthly. In fact, Realty Income has paid cash dividends for 487 straight months, and it usually raises the disbursement three or four times a year. Granted, the boosts are usually on the order of hundredths of cents per share, but they solidify Realty Income's reputation among REIT fans as the stock-market equivalent of an ATM. Realty Income's formula is simple: It leases properties long term, with rent escalators, to fast-food franchises, cinemas, auto-repair shops and other mundane businesses. The tenants pay the property taxes and upkeep.

Occasionally, Realty Income does the unexpected. Late in 2010, it bought a Napa Valley winery, which now accounts for a fat 8% of the trust's assets, and agreed to lease it to spirits giant Diageo for 20 years at a rent that gives Realty Income an initial yield on its investment of about 8%.
Also pays in: all other months

December

ConocoPhillips (COP) $72, 3.7%
You can find all sorts of ways to collect cash from energy enterprises (see 3 Higher-Risk, Higher-Reward Ways to Earn Dividends). But the most popular way is still to buy shares of a large, integrated oil company. Our favorite is ConocoPhillips.

Not surprisingly, the energy giants make more money when oil prices are high and less money when oil prices fall. But that doesn't mean their fortunes -- and yours -- are tied to the whims of energy traders. Conoco is selling the last of its once-20% stake in Lukoil, a Russian oil company, and is using the proceeds to drill vigorously in shale fields in the U.S. in search of both natural gas and "liquids," which means oil, as well as propane and other gas that can be liquefied. Conoco, based in Houston, has raised its payout ten straight years, and over the past five its dividend has grown at an annualized rate of 13%. If shale pays off, shareholders will continue to see fat increases in coming years.
Also pays in: March, June and September

SEE THIS STORY IN SLIDES: DIVIDENDS EVERY MONTH



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