A Primer on Dividend-Paying Stocks (NYSE:PG, NYSE:NWN, NYSE:EMR, NASDAQ:CINF)

from Money Morning by Diane Alter
08/30/2012

AOL Inc. (NYSE: AOL) announced Monday it would divvy out $1.1 billion in cash to shareholders, joining the growing group of dividend-paying stocks - although only for brief moment.

AOL will dole out a one-time payment of $5.15 a share to holders of record Dec. 5, for a total of $500 million given out in dividends.

In addition to the whopping and unexpected dividend news, AOL also reported a $600 million fast-tracked share repurchase agreement with Barclays Plc (NYSE ADR: BCS).

The move comes on the heels of a deal inked in April to sell 800 patents to Microsoft Corp. (Nasdaq: MSFT). At the time, AOL assured its plans were "to return a significant portion of the sale proceeds to shareholders."

The move also follows a push from activist shareholder group Starboard Value LP, which had been lobbying for AOL to unload its patent cache and reward shareholders with a dividend and share repurchase program.

Investors applauded the dividend news, sending shares of AOL up more than 3% Monday. The stock has been on a tear, climbing more than 120% year-to-date. While AOL has only planned a one-time dividend, many other companies in 2012 have announced regular payouts.

Dividend-Paying Stocks: Payouts on the Rise

A number of companies are beginning to recognize just how important dividends have become in this era of low-interest savings accounts and certificates of deposits (CDs) that offer paltry yields. In fact, dividends, once a trademark of stodgy blue chip companies, are emerging in full force in the tech sector.

Fisher Communications (Nasdaq: FSCI) made waves Monday after the company's board approved a special dividend of $10 a share payable on Oct. 19. In addition, starting in the fourth quarter of 2012, the company will shell out regular quarterly dividend payments of 15 cents a share.

Cisco Systems Inc. (Nasdaq: CSCO), one of the Internet darlings of the dot.com heyday, started paying a dividend in April 2011 and just two weeks ago nearly doubled its disbursement. The leading provider of IP-based networking announced on Aug. 15 it was raising its dividend from 8 cents a share to 14 cents. Now sporting a 3.2% dividend yield and still sitting on a pile of cash, the payout ratio suggests Cisco can continue to raise its dividend.

Forbes wrote that the move is another sign that tech companies are morphing into the new industrials. In fact, Forbes asked if Cisco, with its rich yield, could now be as reliable as an electricity stock (a group long revered for healthy dividends).

Apple Inc. (Nasdaq: AAPL), enjoying explosive growth with its iPads, iPods, iPhones and iTunes Store, in March initiated a quarterly dividend of $2.65 per share which was paid out in its fourth quarter of fiscal 2012. It also announced a share buyback program to the tune of $10 billion.

Tech isn't the only sector rewarding its shareholders with cash.

Tobacco giant Altria Group Inc. (NYSE: MO), valued for its attractive and often increased dividend, hiked its dividend payout 7.3% to 44 cents a share last week, for a yield of 4.8%. Offshore drilling behemoth SeaDrill Ltd. (Nasdaq: SDRL) also just increased its dividend by 2 cents to a rich 84 cents a share. And Brinker International Inc. (NYSE: EAT), the parent company of Chili's, Maggiano's and Macaroni Grill, also just announced it was boosting its dividend payout 25%, and it too will initiate a stock repurchase plan.

Diversify With Dividend Stocks

Before diving in to dividend-paying stocks, investors need to do their research. Investing for yield takes some planning.

To be properly diversified, income investors need to look across a broad spectrum.

Money Morning Global Investing Strategist Martin Hutchinson said that in addition to the robust payouts from real estate investment trusts (REITs), master limited partnerships (MLPs), financials and shipping, investors should dot their portfolios with tech stocks like the ones listed above.

Hutchinson also comprised a list of dividend stocks that have survived every recession since 1962, are expected to survive the next one (which looks increasingly more likely), and have not only maintained but raised their dividends for over half a century.

"For investors, that's the true sign of a recession-proof stock," said Hutchinson. "These types of stocks represent the ultimate safe haven for your money. Their share price and even earnings may decline, but their dividends should continue to increase."

Hutchinson's dividend stock winners include:

• The Procter and Gamble Co. (NYSE: PG), the household conglomerate that has increased dividends every year since 1954. Its dividend yield is 3.7%.

• Northwest Natural Gas Co. (NYSE: NWN) has raised its dividend every year since 1956. The company, which stores and distributes natural gas in Oregon, Washington and California, boasts a 3.7% dividend yield.

• Emerson Electric Co. (NYSE: EMR) has increased its dividend yearly since 1957. This global engineering services and solutions company rewards shareholders with a 3.5% dividend yield.

• Cincinnati Financial Corp. (Nasdaq: CINF) has boosted its dividend every year since 1961. The property and casualty insurance stock carries a yield of 4.2%.

Source: Dividend-Paying Stocks: AOL Not the Only One to Raise Payout:

Recession 2013: Prepare Your Portfolio with These Rock-Solid Dividend Payers

JULY 9, 2012BY MARTIN HUTCHINSON, Global Investing Strategist, Money Morning

Successful investing is a bit like connecting the dots. Put enough of them together and they begin to form a picture. Unfortunately, today's dots are pointing towards a recession. With first-quarter GDP growth under 2% and a whole host of indicators moving in the wrong direction, it looks as though the U.S. economy has stalled. That leaves income investors like us faced with a very important question: how do we best protect our portfolios from the stock price declines and dividend cuts that a recession would bring?

One simple answer is to invest in those countries that are not suffering recession. That opens up a world of possibilities.  For instance, you might consider investing in Japan, which grew at over 4% in the first quarter. Orix Corporation (NYSE: IX) is a name I like. 

Or better yet you could invest in emerging markets where growth continues to sizzle. 

That makes stocks like the Aberdeen Chile Fund (NYSE: CH) a good buy-especially considering the fund offers a dividend yield over 10%. The fund is attractive to me for two reasons. First, it's becuse Chile is a well-run country, standing higher than the U.S. on several international business surveys. But more importantly, its dependence on copper and other commodities is not a problem unless the global economy as a whole goes into recession, which I don't expect.

With assets in primarily Chilean securities, the fund also offers investors a nice measure of diversification from the U.S. economy, since they can expect Chile to keep on growing-- even if the U.S. economy takes a step backwards. 

But that doesn't mean you need to avoid the U.S. altogether, either. 

In fact, there is a key indicator I'll discuss in a moment which will allow you to preserve your income and the value of your investments through all but the deepest recessions. First though, you'll need to avoid a few pitfalls. As always, it's never just a matter of picking the stocks with the highest dividend yield. It's just not that simple.

In fact, a number of the highest dividend-paying companies like American Capital Agency (Nasdaq: AGNC) have dividends that depend on financial game-playing--- borrowing in the short-term markets and investing in long-term housing agency debt. 

While the income stream from the agency bonds will remain solid in a recession (because it is effectively government guaranteed) entrusting much of one's wealth to this kind of scheme is foolish. 

Meanwhile, other high-paying dividend companies have overleveraged balance sheets. 

B&G Foods (NYSE: BGS), for example, has an excellent recession-proof business in managing brands of shelf-stable foods such as Cream of Wheat and Grandma's Molasses - products whose sales generally suffer little in a recession. At its current elevated share price of around $26 it still has a dividend yield of around 4%. 

However, its balance sheet has a 4:1 debt/equity ratio, and excluding intangible assets it has a negative net worth. 

BGS also suffered badly in 2008-09, with the share price dropping below $3. This could easily happen again if bank facilities became tight.

The True Sign of Recession-Proof Stocks

However, at the other end of the spectrum, there are some dividend aristocrats which have not only maintained but increased their dividends for over half a century. 

Having survived every recession since 1962, they can be expected to survive the next one, and indeed to continue increasing their dividend. 

For investors, that's the true sign of a recession-proof stock.

As a result, these types of stocks represent the ultimate safe haven for your money. Their share price and even earnings may decline, but their dividends should continue to increase. 

There are 10 such companies, four of which have a current dividend yield of 3.5% or more - giving you a pretty good yield at a time when even 30-year Treasury bonds yield only 2.7%. 

They include: 

• Procter and Gamble Co. (NYSE: PG) has increased dividends every year since 1954. This huge household goods company pays a dividend yield of 3.7%;
• Northwest Natural Gas (NYSE: NWN) has increased dividends every year since 1956. With a dividend yield of 3.7%, the company stores and distributes natural gas in Oregon, Washington and California;
• Emerson Electric (NYSE: EMR) has increased dividends every year since 1957. This worldwide engineering services and solutions company pays a dividend yield of 3.5%;
• Cincinnati Financial Corp. (Nasdaq: CINF) has increased dividends every year since 1961. The property and casualty insurance company pays a dividend yield of 4.2%.

Here's the best part: with those four you even get the diversification of four different sectors along with the ultimate dividend-producing, sleep-at-night investments. 

So you see sometimes, investing can be easy---even in the face of a recession. 

Good Investing,