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TheStreet Open House

Meet the New 'Dividend Aristocrats'

NEW YORK ( TheStreet) -- 2011 is shaping up as pretty lackluster but stocks that paid dividends did better than their cash-hoarding counterparts. By a wide margin.

S&P Capital IQ said in its Lookout Report on Friday that dividend payers in the S&P 500 have returned 1.72% year-to-date vs. a decline of 4.63% for non-payers in the index.

There's been a rash of dividend increases of late as well with Dow components AT&T (T), General Electric (GE), and Pfizer (PFE) all getting in the act this past week.

According to the S&P Capital IQ data, actual cash dividend payments are up 16.2% so far in 2011 from year-ago levels, and 238 of the companies in the S&P 500 have a higher yield than the 10-Year Treasury bond, which settled at 1.84% on Friday.

To put that in perspective, the firm said the indicated dividend yield for the S&P 500 has averaged 43% of the 10-year note's payout since 1995, but right now it sits at 116%.

S&P Capital IQ keeps a list of S&P 500 companies with strong histories of both increasing their dividends and maintaining adequate coverage of the payments by generating sufficient net income. Called the "Dividend Aristocrats," the list saw 10 additions and 1 deletion on Friday.

The criteria to join the club includes a 10-year history of rising payouts, a 2011 earnings coverage rate of at least 2, and implied coverage rates of at least 2 for 2012 and 2013 based on current consensus earnings estimates.

The new members are the aforementioned AT&T, Colgate-Palmolive (CL), Franklin Resources (BEN), Genuine Parts (GPC), HCP Inc. (HCP), Illinois Tool Works (ITW), Medtronic (MDT), Nucor (NUE), Sysco (SYY), and T. Rowe Price Group (TROW).

S&P Capital IQ observed that 3 of the 10 additions are from the financial sector, a mild surprise given the challenges the group is facing.

"While the financials sector as a whole has suffered greatly from the housing decline and recent recession (it fell from 30% of all S&P 500 dividends in 2007 to 12% currently), there are issues with impressive dividend records," the firm said. "Forty financial issues have increased their dividend rate at least 10 years in a row, averaging a 4.11% yield, with 24 of them having a minimum dividend coverage rate (12-month earnings divided by the current dividend rate) of at least 1.5x."

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