The Cream of the Dividend Crop

Our screen picks the highest-ranking names among S&P's "Dividend Aristocrats," companies that have consistently upped payouts

by Beth Piskora From Standard & Poor's Equity Research

Dividends have been in the news recently, but not for the happiest of reasons. Major financial firms like Citigroup (C), Washington Mutual (WM), and Ambac (ABK) have had to slash their payouts to shareholders to help shore up their battered balance sheets. And the negative headlines may have wary investors wondering who's next.

We can't tell you who will be the next company to cut its dividend. But we can give you the names of the outfits that have actually boosted the per-share amount paid out to shareholders each year for the past 25 years or more. We call them the "Dividend Aristocrats."

Standard & Poor's believes it's a smart idea to buy stocks of companies that regularly increase their dividends. This way, as you hold the shares, your returns will grow, and the yield on your initial investments should continue to climb.

Wealth Builders

And dividends are a time-tested wealth builder. More than 40% of the Standard & Poor's 500-stock index's total return since 1935 has been due to reinvested dividends, according to S&P Chief Investment Strategist Sam Stovall.

Each year Howard Silverblatt, S&P senior index analyst, compiles the list of Dividend Aristocrats, S&P 500 companies that are members of the quarter-century club. (View the full roster of Dividend Aristocrats on S&P's site).

For this week's screen, we've decided to use S&P's proprietary Stock Appreciation Ranking System (STARS) to find the most attractive names among the upper crust. We looked for the aristocrats that also carry the highest investment rankings of 4 STARS (buy) or 5 STARS (strong buy) from S&P equity analysts. Stocks with those designations are expected to outperform the S&P-500 index on a total return basis over the coming 12 months, with shares rising in price on an absolute basis.