The Kiplinger Dividend 15 Is On a Roll

Our favorite stocks for dividend income are rebounding well after the 2018 correction.

The Kiplinger Dividend 15, our favorite stocks for dividend income, have bounced back nicely from the 2018 correction. The 15 stocks have an average dividend yield of 3.7%, compared with 2.0% for Standard & Poor’s 500-stock index. Since we last visited the Dividend 15 in our December issue, the stocks have returned an average 4.9%, while the S&P 500 eked out 1.0%. Our dividend darlings have slightly outperformed the S&P 500 for the past 12 months as well. (Prices and returns are as of February 15.)

It’s nice to beat the S&P 500, but the main reason to invest in any of the Kiplinger Dividend 15 is for a reliable income stream that will grow over time. All 15 stocks have raised their dividends over the past 12 months.

Among our stars, Realty Income is up 27.3% over the past four months and 47.2% over the past 12 months. The real estate investment trust is the landlord for Walgreens and 7-Eleven, among others. The soaring share price has pushed Realty Income’s yield below our 4% threshold for high-yield dividend stocks. This is a nice problem to have, but we’re keeping an eye on the payout to see if the yield climbs back above 4%. The company has raised its dividend 100 times since its listing on the New York Stock Exchange in 1994. It still sports a respectable yield of 3.9%.

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Cleaning up. Procter & Gamble (PG (opens in new tab)) has gained 26.7% since we last checked in four months ago. The maker of Gillette razors and Tide detergent has trimmed its brands from 100 to 65 and kept a laser focus on costs. The company beat analysts’ sales and earnings expectations in its fiscal second quarter, which ended in December.

Our biggest loser was pharmaceutical giant AbbVie (ABBV (opens in new tab)), down 9.7% since mid October. The firm’s latest earnings report revealed soft international sales of Humira, its rheumatoid arthritis drug. But AbbVie has a strong pipeline of new drugs. And the shares now trade at nine times estimated earnings for the year ahead.

Lower oil prices have taken a toll on ExxonMobil (XOM (opens in new tab)), which is down 2.5% over the past four months. The firm tends to moderate the size of its dividend hikes when oil is under pressure—but it has raised its dividend for 36 years in a row, averaging about 6% annually.

We divide the Dividend 15 into three groups. Dividend stalwarts have raised their payouts each year for at least 20 years. There are no guarantees, but Walmart, for one, has raised its annual dividend from 5 cents a share in March 1974 to $2.12 per share today. Our dividend growth category includes companies that can continue to deliver generous dividend hikes, fueled by strong growth in sales and profits. Home Depot (HD (opens in new tab)) has beaten Wall Street’s earnings expectations for the past five years. High yields can be a danger sign if they result from a sinking stock price. But our four high-yielders have a long history of generous dividends and the cash flow to keep paying them.

John Waggoner
Contributing Writer, Kiplinger.com
John Waggoner has put personal finance and investing into plain English for more than three decades. He was a senior columnist for InvestmentNews and, prior to that, USA TODAY's personal finance columnist for 25 years. He has written for Morningstar, The Wall Street Journal, and Money magazine. Waggoner has also written three books on finance and investing. He has an undergraduate and graduate degree in English literature and is working on his Certified Financial Planner designation. He lives in Vienna, Virginia.