Wednesday, January 9, 2008

cheapest, safest dividend streams

I currently hold shares in the large U.S. institution Bank of America (BAC). When I bought BAC I explained my rationale that as long as the company does not cut its dividend I would be a happy camper holding the shares. The reason for this is due to the fact that BAC was yielding around 6% and has a legendary history of swiftly growing their dividend ever year. While the share price drifts with the ups and downs of investor sentiment, I am still paid 6% of my investment annually; on time every quarter. 6% is certainly nothing to sneeze at, but this dividend does come with some risk as we all know the U.S. financial system is in peril currently.

So with the markets in free fall, and dividend yields increasing everywhere you look, as a dividend growth investor it really begs the question...

Where can I find the cheapest, safest dividend stream out there in the equity market?

In simple terms, how can I take advantage of market weakness by purchasing vehicles that have the utmost certainty of paying me high, and preferably ever-increasing dividends for the long term?

Obviously finding these companies is not an easy task. One must analyze much about the company including cash flow, debt levels, future outlook, competitive position, and potential threats. It is difficult to determine whether a dividend is at risk or not, or might be at risk in the near future. So which companies might fit the bill? Which stocks offer the highest, safest yields, exluding trusts, REITS, and LPs? I'm asking you!

The higher the yield, the cheaper the dividend stream Perhaps these firms might be worth a look, these are two of my candidates for 'cheapest, safest dividend stream'

Pfizer (PFE) - U.S. pharma. company yields 5.4% and has always been a swift dividend raiser, including very recently. Although the company has little growth, they have a great balance sheet.

U.S. Bancorp (USB) - U.S. banks are obviously in a bad spot right now but USB just recently raised their dividend by 6% to now yield 6.1%. Warren Buffet also likes USB.

Rothmans (ROC) - This Canadian tobacco company yields 5.6%, and I hear their product is quite addictive. They also just raised their dividend by 16%.

Who are your candidates?


Preet said...

I ended up picking up some more BNS at 46.89 (also got some more RIM at 95). Crazy days when you look at the intraday swings!

Anonymous said...

See newspaper stocks for good (very cheap) companies with great dividends. LEE in particular...Regards Babui

John said...

Look at the components and weightings of the i Shares Dow Jones Select Dividend Index Fund

Middle Class Millionaire said...


I think over the long term you can't go wrong with the below 3. All have great histories of increasing dividends and in my opinion the dividends are extremely safe.

1. Canadian Banks
2. JNJ
3. POW


MG said...

Thanks for the comments. What MCM provided was what I was looking for to give readers some ideas for safe yield in volatile markets.

MCM, Given your opinion here, I see why you are interested in CIBC. said...

Thanks for your pick.
I always like Pifzer.
But then again, I think I will do some research myself first.

messels said...

Hi MG,
i'm currently long PCU FRO & BPT for dividend yields.

great site; i added you to my feed. :)

Anonymous said...

I bought PFE for it's dividend ant then a short time later:

"Pfizer to buy Wyeth for $68 billion, cuts dividend
01.26.09, 10:08 AM EST"

I sold. I'm not interested in waiting to see if the acquisitions works out.