In order to give investors a benchmark by which to measure dividend investing in the U.S., Standard & Poor's launched the S&P High Yield Dividend Aristocrat Index in November 2005. This index is made up of the 50 highest-dividend-yielding stocks in the S&P 500 that have had annual increases in their dividends for at least 25 consecutive years.

As Jim Cramer has mentioned on his television show "Mad Money," dividends are the "gift that keeps on giving." And for the names in this index, that's probably a truer statement than for most other companies.

In addition, the S&P High Yield Dividend Aristocrat Index identifies the top 25 names out of the total 50. Here's a list of the top 25 dividend aristocrats in the S&P 500.

Although I believe every company in the index is interesting, this 25-name list is worth looking at in order to see who the other shareholders are, and also to see if there is any consensus on the top picks, even among those 25.

One of the names on the S&P High Yield Dividend Aristocrat "favorites" list is Wal-Mart ( WMT), which was basically flat this past year, going from $46 to a tad over $47. The company currently yields 1.4% and trades for just nine times cash flows.

Despite its massive size, it still has a 21% return on equity and enjoyed double-digit revenue growth of 12% this past year. Additionally, during the holiday season this past December, the company exhibited 1.6% year-over-year growth, compared with the 1% it had announced previously.

Investors who have been accumulating Wal-Mart over the past year include Warren Buffett and Joel Greenblatt, author of The Little Book That Beats the Market. Another fund that's invested in Wal-Mart is Clarium Capital, run by Peter Thiel, who believes the U.S. economy is heading for massive trouble. It's interesting that his hedge is to own Wal-Mart, which is probably a decent recession-buffer.

Another aristocrat I believe is interesting for 2007 is Johnson & Johnson ( JNJ). This stock also barely moved over the past year, going from just under $65 to just over $65, as seen in the following chart:


Johnson & Johnson Goes Nowhere


The company has $14 billion in the bank and only $2 billion in debt, along with an amazing return on equity of 30%. It trades for 11 times cash flow.

Intel Capital, which allocates Intel's ( INTC) spare billions, owns Johnson & Johnson. Another owner of the company is Islamic-compliant fund Amana Income, as is Warren Buffett, who tends to own a lot of these dividend aristocrats. Take a look at Johnson & Johnson's Stockpickr page.

David Blitzer, managing director and chairman of the index committee at Standard & Poor's, has said that "since 1926, dividends have contributed nearly a third of the market's total equity returns." I'm sure many of the investors I've mentioned here believe that if you can get that third and do it by buying companies that are both cheap (as a multiple of cash flows) and growing, then it's quite likely you will outperform the market.

Stockpickr is a wholly owned subsidiary of TheStreet.com.

More from Opinion

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Trump Blinks on China Trade War That's Looking Harder to Win

Trump Blinks on China Trade War That's Looking Harder to Win

Monday Madness: GE, China, and Micron

Monday Madness: GE, China, and Micron

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly