Looking for a REIT Brand as Strong as Clorox?

NEW YORK (TheStreet) -- When shopping for dividend stocks it is important to fill your cart with really successful companies that build their strategies on vivid and hardy forms of differentiation. These leading companies are unique in that they provide lasting competitive advantage by learning how to sustain differentiation over time and through constant change.

One company that has built a powerful model of repeatability is Clorox ( CLX). An estimated eight out of 10 American households use Clorox brand bleach and the globally recognized consumer brand conglomerate sells products in more than 100 countries in North America, South America, Europe, Africa, and Asia.

Since its founding in 1913, Clorox has earned the trust and respect of people everywhere. The Clorox regular bleach remains the most trusted brand of bleach and the Clorox disinfecting products help eliminate germs around the globe.

Clorox is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers Index and a Dividend Champion. The company's peer group includes: Procter & Gamble ( PG) with a 3.3% yield, Colgate-Palmolive ( CL) with a 2.3% yield and Kimberly-Clark ( KMB) with a 3.5% yield.

Clorox is a stalwart dividend stock as the company has maintained and increased its dividend for over 35 consecutive years. The consumer giant, with a market capitalization of $9.46 billion, recently increased its dividend yield by 6.67% (from $.6000 to $.6400). The current stock price is $72.99 per share and the dividend yield is 3.5%.

Stock Your Cart with Some Repeatable Dividends

The power of a repeatable model like Clorox lies is the way it turns the sources of differentiation into income -- and of course dividends. Clorox has a remarkable record based on decades of consistency, not just paying high returns.

As Ben Graham wrote in The Intelligent Investor, "one of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years." Graham explained that "a record of continuous dividend payments for the last 20 years or more is an important plus factor in a company's quality rating." So this consistency of "paying out a dividend does not guarantee great results, but it does improve the return of the typical stock by yanking at least some cash out of the manager's hands before they squander it or squirrel it away."

Brick and Mortar in Your Dividend Basket

This advantage of dividend payers is what is attracting more investors into the world of Real Estate Investment Trusts.

REITs distribute (by law) at least 90% of their taxable income to shareholders annually in the form of dividends, investors are becoming increasingly attracted to the notion of balancing a portfolio with steady and reliable dividend income.

A company that qualifies as a REIT is permitted to deduct dividends paid to its shareholders from its corporate taxable income. As a result, most REITs historically remit at least 100% of their taxable income to their shareholders and therefore owe no corporate tax.

Clorox is one of just 105 U.S. publicly-traded companies that have paid 25-plus straight years of consistent and higher dividends (source: DRiP Investing Resource Center). Included in this list of "dividend champions" there are three REITs that have maintained the consistency and durability of the "best in class" dividend stocks.

Federal Realty ( FRT), HCP ( HCP) and Universal Health Realty Trust ( UHT) have collectively increased their dividends for 98 years.

These REITs provide investors with a powerfully unique income strategy in which the differentiated alternative is also the essence of the repeatable value proposition. Unlike most other fixed-income alternatives, these REITs perform a valuable task by turning the sources of rental income into powerfully consistent and reliable dividends.

Because REITs provide a disciplined dividend proposition, investors are attracted to the strong source of repeatable income -- the essence of the strategy and the reason that many REITs have been able to sustain their competitive advantages over time. These REITs have built their remarkable record of dividend performance on consistency, not just high returns.

More from Opinion

Musk Goes on Unoriginal Media Tirade

Musk Goes on Unoriginal Media Tirade

What's Happening in Video Games This Week: On the Road to E3

What's Happening in Video Games This Week: On the Road to E3

Wednesday Wrap-Up: Let's Talk About General Electric

Wednesday Wrap-Up: Let's Talk About General Electric

Week of the Women From Finance to Fast Food

Week of the Women From Finance to Fast Food

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

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