Income investors shouldn’t fret over who’s in the White House next January.
Dividend stocks are on fire right now, and there are plenty of companies that will continue to kick money back to shareholders regardless of whether Barack Obama or Mitt Romney is in office the next four years.
With certificates of deposit, money-market accounts and U.S. Treasuries basically worthless thanks to the Federal Reserve’s steadfast insistence on keeping interest rates near zero, investors are flocking to dividend stocks like never before. And dividend payers are rewarding the burgeoning masses with more generous payouts than ever before.
Dividend payouts are up 16% in 2012, according to The Wall Street Journal. In fact, the recently completed third quarter set a new record for dividend payouts. This comes on the heels of 2011, when companies listed on the S&P 500 paid a combined $240.6 billion in dividends – the highest total since 2008.
Some dividend payers will have a longer shelf life than others, of course. If Romney wins the election, Fed chief Ben Bernanke’s days are almost certainly numbered – Romney said so himself. No Bernanke could mean doing away with near-zero interest rates, which may convince some income investors to drop their dividend stocks and dive back into CDs and MMAs.
But some dividend stocks are evergreen. Their payouts have been growing annually for decades – regardless of election results, recessions, inflation rates, fiscal cliffs, European debt problems, Federal Reserve chairmen, the Boogeyman, the Grim Reaper and other real or imagined market drivers.
To certain companies, all these headline-making events fall under the category of “just noise” – as my colleague Andy Crowder likes to call it.
Here are four companies able to tune out all the noise and grow their dividends regardless of which party is in office:
- Johnson & Johnson (NYSE: JNJ): The consumer staple/pharmaceutical company has increased its dividend every year since 2002. Its recent dividend hike in May brought the quarterly payout to $0.61 per share – more than double the payout from eight years ago. With a current yield of 3.6%, Johnson & Johnson is one of the more generous, reliable dividend payers on the market.
- McDonald’s (NYSE: MCD): The largest fast-food chain in the world will increase its dividend a whopping 10% this December. The new 77-cents-per-quarter payout will bring McDonald’s yield to 3.3%. Granted, the stock’s 6% decline this year makes that yield look a bit shinier. But this is a company that has upped its dividend by an average of 20% a year since the 2008 recession. It occupies a space that offers cheap food worldwide in the midst of a struggling global economy. As long as those struggles continue, McDonald’s should flourish.
- AT&T (NYSE: T): Telecommunications is one of the fastest growing industries in the world. So it’s no surprise that telecommunications stocks are perhaps the most generous dividend payers on the market. Telecommunications companies offered the highest yield rate of all S&P 500 stocks in 2011, at 5.9%. And no telecommunications company is bigger than AT&T. The company offers its shareholders a yield of nearly 5%, and the dividend has grown steadily every year since 2004. Other telecommunications companies may offer higher yields. But AT&T is an established, blue-chip company that has offered generous dividends for years.
- Procter & Gamble (NYSE: PG): This is a company designed to profit even if the world were coming to an end. If the Apocalypse was upon us, people would no doubt load up on Duracell batteries, Crest toothpaste, Pampers and Pepto-Bismol. Those are just four of P&G’s dozens of varied brands. People need those products in any economy – under any president. That’s how P&G has managed to increase its dividend for 56 straight years. The current yield is 3.3%, with a quarterly payout of $0.56 per share. If any stock is completely unaffected by the upcoming election, this is it.
Next month’s election is important. Whether Romney or Obama wins, the outcome will have far-reaching implications for many investors.
But for those of you who want to limit your exposure to the whims of the American voter, it’s not a bad idea to play it safe by investing in blue-chip dividend stocks with a long history of returning money to their shareholders.
These four companies are a good place to start.