Tuesday, September 16, 2014

5 Dividend Stocks That Gave Me A 20%+ Annualized Return

Andy Warhol in 1968 said that "In the future, everyone will be world-famous for 15 minutes." In our society, many things follow the 15 minutes of fame paradigm, though duration of time is sometimes more or less. For example, at a fireworks display each rocket is viewed by the audience, albeit just for a few seconds. Olympic athletes will train in obscurity for years for a chance to have a gold medal hung around their neck as the world watches. When it comes to selecting dividend growth stocks, the ones you want are those that will perform well over the long haul.

Each day in the financial section of your newspaper there is a list of the day's top performing stocks. These stocks often have double digit (or more) gains. Problem is if you didn't buy them yesterday, you probably will not be able to reap the benefits. Like the fireworks, many of the stocks will quickly fizzle and fall back to earth.

Looking through my portfolio, I found several stocks that have performed well over many years, and I expect them to continue to do so. Below is a list of stocks that have provided me with an annualized 20%+ return since I first bought them through mid September 12, 2014:

Leggett & Platt Inc. (LEG) makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as products for non-furnishings markets. I first purchased the stock in March 2010 at $20.29. It has increased its dividend each year and is currently yielding 3.4%. Since that first purchase I have added to my position 5 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 20.9%.

Genuine Parts Co (GPC) is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. I first purchased the stock in May 2009 at $32.50. It has increased its dividend each year and is currently yielding 2.8%. Since that first purchase I have added to my position 5 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 23.4%.

Lockheed Martin Corp. (LMT), the world's largest military weapons manufacturer, is also a significant supplier to NASA and other non-defense government agencies. I first purchased the stock in July 2011 at $81.04. It has increased its dividend each year and is currently yielding 3.0%. Since that first purchase I have added to my position 3 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 28.2%.

Microsoft (MSFT), the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. I first purchased the stock in October 2011 at $27.11. It has increased its dividend each year and is currently yielding 2.6%. Since that first purchase I have added to my position 8 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 33.2%.

General Dynamics (GD) is the world's fourth largest military contractor and also one of the world's biggest makers of corporate jets. I first purchased the stock in August 2010 at $63.54. It has increased its dividend each year and is currently yielding 2.1%. Since that first purchase I have added to my position 6 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 33.8%.

Whenever I present a list of top performers I also like to include one or more stocks at the bottom, so you can judge the range that I am working in. To that end, below is the stock with the lowest annualized return that I have held for at least one year:

Northwest Natural Gas Co. (NWN) is a natural gas utility that provides service to some 621,000 residential, 64,000 commercial and 1,000 industrial customers in Oregon and southwestern Washington. I first purchased the stock in December 2012 at $43.63. It has increased its dividend each year and is currently yielding 4.2%. Since that first purchase I have added to my position 1 time as the stock price continued to increase. Over the period I held the stock, my annualized return is 3.7%.

We all know that a portfolio of dividend growth stocks can provide you with a dependable and increasing income. As the data above shows, I have also come to expect significant price appreciation over time.

Full Disclosure: Long LEG, GPC, LMT, MSFT, GD, NWN in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

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- Early Warning Signs of a Dividend Cut
- Income Annuities vs. Dividend Stocks

(Photo Credit)


Tags: [LEG] [GPC] [LMT] [MSFT] [GD] [NWN]

3 comments:

  1. It is not too surprising that a utility stock is at the bottom of your annualized performance list. Despite the relatively high yield, utility stocks are limited in their growth potential because they operate in a regulated environment. Do you own other utility stocks and are they near the bottom of your list?

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  2. FerdiS: Yes. I have held ED since 1/21/05 and its annualized return is 8.4%. I would put it in the middle to low group. It was purchased before interest rates were so low, so I was able to benefit from the price appreciation from investors chasing yield.

    Best Wishes,
    D4L

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  3. I see a number of your purchases were made after the drop in 2009. ( Being able to take advantage of market drops like that are a great boon, obviously). Have you looked at how much of the 20% return can be attributed to seizing that opportunity which (at least by my standards) is still relatively recent (compared to a 15-20 year time frame that I hope to be holding a stock for...)

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