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Investors Steer to Safety of Dividend Stocks

Stocks in this article: SDIV VDIGX

"Those are two banks that grow dividends well over 100% this year," Newhall says.

Among the top VDIGX holdings are Automatic Data Processing (ADP) (with a dividend of $1.44 and yield of 2.80%), Exxon Mobil (XOM) ($1.88/2.4%), Pfizer (PFE) ($0.80/4%), Pepsi (PEP) ($2.06/3%), Medtronic (MDT) ($0.90/2.4%), Western Union (WU) ($0.32/1.6%), IBM (IBM) ($3/1.8%), Cardinal Health (CAH) ($0.86/2%) and Johnson & Johnson (JNJ) ($2.38/3.4%).

Colgate-Palmolive (CL) (with a dividend of $2.32 and yield of 2.7%) "is one we consider a stalwart of the fund," Newhall says. "Colgate is such a great example because you look at it now and, on a run-rate basis, its dividend should increase this year about 14% and this is the 48th consecutive year of dividend growth. We'd love to fill the portfolio with 50 companies like that."

SDIV maintains an underlying focus on diversity. It has a multi-national selection of 100 companies, each equally weighted.

"The expectation going in is that we would see a lot of concentration in financials and utilities," del Ama says. "When we came back with their list of the top-paying companies we found that we had a ton of consumer companies. We have a pretty broad range of companies."

REITs comprise 22% of the portfolio, followed by consumer discretionary (16%), telecommunications (16%), financial services (10%), utilities (8%), banks (5%), consumer staples (5%), energy (5%), industrials (5%), insurance (3%), technology (3%) and health care (2%).

International company and currency holdings break down among the U.S. (32%), Australia (24%), Great Britain (10%), Canada (6%) and Singapore (4%).

The equal weighting "materially diminishes the risk of any one company cutting or significantly decreasing their dividends if the get into financial difficulty," del Ama says.

A key selection criteria for both funds is not just current yields, but companies that have the ability to grow that yield.

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