investing

Kiplinger Dividend 15: CVS Interrupts Its String of Hikes

After raising its payout for 14 years straight, the pharmacy ended its streak in 2018.

Since we last updated the Kiplinger Dividend 15, the list of our favorite dividend-paying stocks, volatility has ruled the market. Despite the ups and downs, Standard & Poor’s 500-stock index has returned 11.9%, including dividends, since we launched the Dividend 15 in our December issue. By comparison, our collection returned an average of 5.4%. Of course, these stocks were chosen for their stable payouts, income growth or above-average yields, not their ability to outpace the market. (Prices and returns are through June 15.)

That said, a handful of the Dividend 15 beat the S&P 500. Texas Instruments (TXN) returned 31.6%, thanks to strong demand for its chips. Home Depot, helped by a strong housing market, returned 24.6%. Shares in Emerson Electric, which makes electrical and electronic products, have returned 17.5%. And Enterprise Products Partners, which runs oil and gas pipelines, posted a 12.9% gain.

Still, two consumer-products giants have been a drag on the group. Johnson & Johnson (JNJ) shares fell 3.8%, and Procter & Gamble dropped 12.8%. But we’re upbeat about the pair with regard to both their dividends and their solid prospects overall. Johnson & Johnson raised its quarterly payout by 7% in April. The company, says CFRA analyst Jeffrey Loo, has “unmatched depth and breadth in growing global health care markets and solid positions in drugs, medical devices and consumer products.” Procter & Gamble (PG) lifted its quarterly dividend by 4% in April, and analysts expect the company to report 7% earnings growth in 2018.

A Long Streak Ends

CVS Health (CVS) was a laggard, too. The stock sank 12.0%. What’s more, despite expectations that the firm would continue its history of robust dividend hikes, it did not raise its payout for 2018, ending a 14-year record of consecutive annual increases. Analysts say a freeze of the dividend at current levels is a possibility following CVS’s deal to buy insurer Aetna for $69 billion. The merger, okayed by shareholders, still needs regulatory approval. If it goes through, a broader customer base will make CVS more competitive, says Value Line analyst Andre J. Costanza. And if regulators nix the deal, CVS should still deliver solid results. We’re keeping CVS in the Dividend 15 for now, but we are watching its dividend policy. Our other dividend growers are on track: Home Depot, Lockheed Martin and Texas Instruments have increased their annual payouts by double-digit percentages over their most recent fiscal years.

That brings us to Realty Income (O). Rising interest rates have put pressure on real estate investment trusts. Borrowing to buy new properties has become harder for REIT managers, and other investments’ yields have become more competitive. Since we launched the Dividend 15, Realty Income shares have lost 4.3%, while the S&P 500 Real Estate sector index was flat. Even so, Realty Income’s business is humming along. Revenue for the quarter ended in March rose 7% from the same quarter a year ago, and funds from operations (a profit measure roughly equivalent to earnings) climbed 20%. Plus, Realty Income yields 5%, more than the typical REIT yield of 4.1%.

Most Popular

When Could We Get a Third Stimulus Check?
Coronavirus and Your Money

When Could We Get a Third Stimulus Check?

President Biden and others in Congress are pushing for a third-round of stimulus checks, but it might be a while before we get them.
January 20, 2021
Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer
Coronavirus and Your Money

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer

The IRS has an online tool that lets you track the status of your second stimulus check.
January 18, 2021
20 Best Stocks to Buy for the Joe Biden Presidency
stocks to buy

20 Best Stocks to Buy for the Joe Biden Presidency

Joe Biden has been sworn in as America's 46th president. These are 20 of the best stocks to own under the new administration.
January 20, 2021

Recommended

13 Dividend Stocks That Have Paid Investors for 100+ Years
stocks

13 Dividend Stocks That Have Paid Investors for 100+ Years

Here are 13 dividend stocks that each boast a rich history of uninterrupted payouts to shareholders that stretch back at least a century.
May 21, 2020
What Could 2021 Hold for Your Finances?
retirement planning

What Could 2021 Hold for Your Finances?

After a wild 2020, many of us are ready for a fresh start in the new year.
January 22, 2021
Don’t Have a Pension? The SECURE Act Could Help
retirement planning

Don’t Have a Pension? The SECURE Act Could Help

If you’re worried about retirement, the SECURE Act has a lot to offer. It has several provisions to allow people to save more, for more years — and it…
January 22, 2021
9 Utility Stocks to Buy for 2021
Kiplinger's Investing Outlook

9 Utility Stocks to Buy for 2021

Utility stocks: They're steady, they're dependable, they deliver income. That's the case with most of these top 2021 picks ... but a couple break the …
January 20, 2021