This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10 Best 'Dividend Aristocrats' for 2012

NEW YORK ( TheStreet) -- In September 2010, we set out to provide you, the investor, with a list of 10 dividend stocks most likely to outperform.

Happily, we did not disappoint.

Our 10 selections -- limited to the universe of Dividend Aristocrats (an index of companies that raised dividends for 25 years or more) -- managed to handily outperform the S&P Dividend Aristocrats ETF (SDY).

Even more happily, our decemvirate outperformed the Dow Jones Industrial Average (DIA), the S&P 500 (SPY) and the ever-formidable Vanguard Total Stock Market Index (VTSMX).

But a dose of humility is in order. Had it not been for the stunning outperformance of VF Corp. (VFC), the remaining portfolio would have been entirely pedestrian. In this case, luck trumped foresight.

But there is an important lesson to be had: For the patient investor, time and inactivity can be powerful allies.

If a covered-call strategy been used to generate income against this portfolio, it's very likely that VF Corp. would have been called away, leaving the investor with a few quick bucks at the expense of an extraordinary (long-term) capital gain.

Sixteen months later, the patient investor could have chosen to divest from VF Corp. at a handsome profit and favorable tax treatment, reinvesting the profits into a more attractively valued stock (should such a stock exist).

To that end, the following 10 stocks are among the most attractively valued Dividend Aristocrats for 2012, also meeting the criteria that we established in 2010:
  1. Each stock must have a liability-adjusted cash flow yield* (using five-year average cash flow) greater than the yield of a 10-year U.S. Treasury note.
  2. Each stock must have a return on invested capital greater than 10% (using five-year historical data).
  3. Each stock must have appreciated in value over the past decade.
  4. Each company must have a five-year average tax rate greater than 25%.
  5. Each company must have a "quick ratio" greater than 1.

As always, model portfolios should not be treated as gospel; rather, use them as a starting point for your own research. Similarly, all investors should apply their own valuation and qualitative criteria to determine what constitutes a "good buy."

Lastly, if this author could always predict stock market winners, he would probably not be writing articles -- so please set your expectations accordingly.

*5-Year Avg. Free Cash Flow / ((Outstanding Shares x Per Share Price) + (Liabilities - Cash))

Because financial and insurance companies cannot be valued with a simple cash flow formula, those companies have been omitted from our consideration.
1 of 11

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BDX $161.26 0.00%
HRL $38.55 0.00%
ITW $104.52 0.00%
LEG $49.29 0.00%
NUE $49.78 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs