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.