GATE Exam

Robert Hauver
http://www.DoubleDividendStocks.com



The Best Dividend Stocks - The Dividend Aristocrats
As a tool for creating dependable passive income, the
dividend has stood the test of time.  Studies have shown
that, from 1926 to 2004, dividends accounted for 35% of
shareholder returns. However, after adding in the effects
of reinvesting the dividends and compounding, dividends
returned more than 25 times than price appreciation did.

During the tech bubble/dot.com boom of the late 90's, many
investors ignored dividend paying stocks when looking for
the best stocks to buy.  However, that's no longer the
case, as now, even many tech companies have begun paying
dividends.

In fact, since 2003, CNN reports that "there were over 100
dividend increases and initiations among tech firms, vs. 4
dividend cuts. Initiating dividend payouts helped these
companies to win back investor confidence soon after the
Internet bubble burst."

So what makes this group of dividend stocks so special?
After all, not every dividend stock is worth buying, even
if it pays a very high dividend. As a matter of fact, an
abnormally high dividend yield can often be a warning
signal to income investors to avoid a stock, even though it
may have the highest dividend in its peer group.

What distinguishes the S&P's Dividend Aristocrats group is
that these are stocks which have increased their dividends
for the past 25 consecutive years.  Remarkably, some of
these companies have increased their payouts for over 50
years running.  These are stocks with a long, steady
history of dividend growth, to say the least.

Logic would also suggest that any company that can make
these consistent increases, must have a strong business
model, with ample cash flow to support their payouts
through both good and bad economic cycles.  However, since
the current economic downturn of 2008-2009, some of these
firms have actually cut their dividends, and will be
eliminated from the group next year.

So, which companies in this group are actually the best
stocks to invest in?  Should you just buy stocks with the
highest dividend yield, or is there a better way to find
the best dividend stock to invest in?

First of all, take a look at the industry sectors:  Are
there attractive stocks in a beaten-down or currently
lagging sector, such as health care, or utilities? For
example, these 2 sectors are only up 6.5% and 7.1%,
respectively, in 2009, whereas the basic materials sector
is currently up over 27%!

As a value investor, you may want to seek out stocks who
haven't made huge dramatic runs up to new highs, but,
rather, have been somewhat left behind.  The trick to this
strategy is making sure that the stock or its peer group
doesn't have serious internal problems, or external
problems.  For example, tobacco companies were solid stocks
to invest in for many  years, until their related health
problems emerged.

Always compare a firm to its peers to get a clearer picture
of its strengths and weaknesses.  A good place to do this
is the clearstation website, which has a pulldown menu with
a feature called "key ratios", with which you can compare a
stock to its industry, sector, and the S&P simultaneously.
You'll see comparisons of many metrics, including: market
cap, sales per employee, dividend yield, dividend growth
rate, return on assets, return on equity, return on
investment, p/e, price to book, price to cash flow, debt to
equity, and many other metrics.


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Want to see a list of all the Dividend Aristocrats and
their dividend yields? Visit Robert Hauver's Dividend
Aristocrats blog at Hub-Pages:
http://hubpages.com/hub/Dividend-Aristocrats