NEW YORK (Stockpickr) -- Yesterday's "Crash of 2:45 p.m." might not have led to a long-lasting decline in stock values, but it did provide a very valuable lesson for investors in search of some stability in an otherwise volatile market: While stock prices can fluctuate wildly, dividends continue to deliver income to shareholders.
For many in today's stock appreciation obsessed market, the idea of turning to income stocks for gains may sound surprising, but the two are actually more closely connected than they first appear. Historically, companies that pay higher dividends materially outperform those that don't. In the last 36 years, dividend stocks outperformed the rest of the
by 2.5% annually. And they outperformed nonpayers by nearly 8% each and every year, according to a study from NDR. That means that when a company actually increases its dividend, investors would do well to take notice.
Here's a look at the companies that
High-Yielding Stock Ideas
Top 10 Dow Dividend Stocks
Despite market conditions that have been anything but supportive for financial stocks in the past few years, there's a serious growth story taking place in shares of
, an $11 billion financial advisory firm. That growth is flowing through to Ameriprise's dividend payouts too; the company hiked its dividend 5.9% to 18 cents per share last week.
Since its 2005 spinoff from
, Ameriprise has been building an investment service empire through an impressive series of acquisitions that will bring the company's assets under management to more than $400 billion. One of the most significant of those is the purchase of Columbia Management, a major investment manager that's currently owned by
Bank of America
. Columbia manages more than 90 mutual funds and administers investment accounts for corporations, non-profits, and individuals. Despite Ameriprise's significant outlay to get Columbia under its umbrella, the company will still have significant excess capital in play -- more than enough to keep doling out its quarterly payout to shareholders. Expect that yield to keep producing for investors right now.
One of those investors is the
(SBFAX), a small mutual fund that holds Morningstar's four-star rating.
are among its other positions.
With all the focus that
have been seeing lately, it's nice to see that one company not directly involved in the Deepwater Horizon oil spill is making the headlines:
. Everyone's favorite supermajor announced a 4.8% dividend increase last week to make our list, giving shares a 2.75% dividend yield.
Exxon has been on top of the oil game for a long time, and with the acquisition of
, the company's hoping to add natural gas to its repertoire in a meaningful way. That's a truly good development for investors, as the diversification into natural gas takes some of the risk away from Exxon's business -- particularly as oil prices slide and extraction costs continue to be burdensome. From a shareholder value standpoint, Exxon is one of the best players in its field, having returned $39 billion to shareholders in the last five years in the form of dividends, all while reducing its outstanding shares by 23%. Tons of cash on hand and a AAA credit rating make this income stock a safe bet for the next few years.
Investors in the
certainly hope so -- the company is the biggest holding in the fund, which mirrors the composition of the S&P 500 index. Other positions include
has been a fickle stock for dividend investors in the past couple of years. With a mounting recession and a largely cyclical business, the paper giant slashed dividends to save significant amounts of cash to stifle any financial hemorrhages. As the economy continues its apparent recovery, IP decided that it could begin to increase its dividends once again, leading to last week's biggest hike, a 400% dividend increase that brings the company's yield to 2.14%.
The decision to increase its dividend is a significant commitment for International Paper. Now that it's decided to significantly restore its dividend levels, the company is essentially making it clear that it doesn't foresee any hiccups in the near term that could force it into any sort of liquidity trouble. Still, with dividends at around half of historic levels right now, IP has a little bit of wiggle room. That suggests that as long as recovery continues on track, we should expect to see additional dividend increases out of this stock.
(VMIAX) is hoping so -- the fund owns a sizable stake in International Paper. Other holdings include
For the rest of this week's dividend stocks, check out the
And if you haven't already done so,
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-- Written by Jonas Elmerraji in Baltimore.
Jonas Elmerraji is the editor and portfolio manager of the
Rhino Stock Report
, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including
, and has been featured in
Investor's Business Daily