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Dividend Stocks offer stability amidst market volatility

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September 19, 2011 – Comments (0) | RELATED TICKERS: KO , PM , MCD

The past few weeks have been characterized by high volatility in the stock market. At the same time prices for some of the most widely held blue chip dividend stocks have dropped less than the market. Some quality dividend stocks are even close to new 52 week highs, as investors try to put their money in safe investments. The reason why these dividend stocks are so popular is because their investors keep receiving their distributions every quarter, without interruption. In addition, these companies’ culture of consistently raising dividends for decades has created a loyal following by long-term investors. The regular dividend paymentprovides a cushion when there is a decrease in prices, as long-term investors are willing to step in and add to their positions on any weakness in the stock price.

The following blue chip dividend stocks have hardly moved during the volatile past month:
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. This dividend aristocrat has increased dividends for 39 years in a row. Abbott has a ten year dividend growth rate of 8.80% per year. The company has also managed to increase EPS at an annual rate of 11.20% over the past decade. Yield: 3.80%(analysis)

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. This dividend aristocrat has increased dividends for 49 years in a row. Johnson & Johnson has a ten year dividend growth rate of 13% per year. The company has also managed to increase EPS at an annual rate of 11.40% over the past decade. Yield: 3.50% (analysis)

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. This dividend aristocrat has increased dividends for 55 years in a row. Procter & Gamble has a ten year dividend growth rate of 10.90% per year. The company has also managed to increase EPS at an annual rate of 15.30% over the past decade. Yield: 3.40%(analysis)

Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company was spun off from Altria Group (MO) in 2008, and since then has raised dividends consistently every year. Yield: 3.70% (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverages worldwide. This dividend aristocrat has increased dividends for 49 years in a row. Coca-Cola has a ten year dividend growth rate of 10% per year. The company has also managed to increase EPS at an annual rate of 12.30% over the past decade. Yield: 2.70% (analysis)

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a foodservice retailer worldwide. This dividend aristocrat has increased dividends for 34 years in a row. McDonald’s has a ten year dividend growth rate of 26.50% per year. The company has also managed to increase EPS at an annual rate of 20.70% over the past decade. Yield: 2.70% (analysis)

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. This dividend aristocrat has increased dividends for 37 years in a row. Wal-Mart Stores has a ten year dividend growth rate of 17.80 % per year. The company has also managed to increase EPS at an annual rate of 11.80% over the past decade. Yield: 2.80% (analysis)

What makes these businesses unique is that all of them have strong competitive advantages. Consumers are willing to use their products or services and even are willing to pay a premium price for it. As a result, these companies have been able to generate higher revenues, which translate to higher profits, in order to afford hiking dividends annually for decades. Long-term investors are holding onto these stocks because as long as these businesses keep selling to consumers, they will keep earning enough cash to pay higher distributions.


Full Disclosure: Long all stocks mentioned above

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