Dividends Stocks: The S&P Elite

S&P's latest list finds 28 "Dividend Aristocrats"—companies that have boosted their payouts in each of the past 25 years—with top S&P STARS rankings

By Beth Piskora From Standard & Poor's Equity Research

Companies in the Standard & Poor's 500-stock index cut dividends to the tune of $31.74 billion year-to-date through Oct. 24. Even some companies that had previously increased their dividend payments annually for 25 years or more—the Standard & Poor's "Dividend Aristocrats"—were forced by the general market and economic turmoil to cut their dividends this year.

With that in mind, we screened for those members of the Dividend Aristocrats—the full list of all such companies can be found here—that also have an S&P investment ranking of 4 STARS (buy) or 5 STARS (stong buy), suggesting expected outperformance in the coming 12 months, and that have not cut dividends this year.

Average Yield Tops 4%

Looking beyond the Dividend Aristocrats to the broader S&P 500 index, S&P Senior Index Analyst Howard Silverblatt of S&P Index Services, which operates independently of S&P Equity Research, uncovered some interesting statistics.

"The average yield for issues paying dividends is 4.01%," he notes. "I don't recall exactly when it's been that high, but it's been decades."

This time last year, only 19 issues within the S&P 500 yielded at least 5%; currently 97 issues (32 financial, 65 nonfinancial) yield more than 5%.

Digging deeper into the financial-services sector, Silverblatt found 11 companies that suspended their dividends this year. Thirty-five financial-services companies cut their dividends, for a total of $30.6 billion, but, surprisingly, 37 financial-services companies increased their dividends. The dividend increases totaled $2.4 billion, and came from some of the companies on this week's screen, including Aflac (AFL), BB&T (BBT), and Chubb (CB).

Looking at Telecom Services, Utilities

Increasingly, investors are well advised to search for income-producing stocks outside of the financial-services sector. Silverblatt says the telecom-services sector has a dividend efficiency ratio (percentage of dividends divided by percentage of market value within the S&P 500) of 2.1—much higher than the 1.43 dividend efficiency ratio posted by the financials. The utilities sector also has a high dividend efficiency ratio.