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:
Cincinnati Financial Corp. (CINF) is an insurance holding company that primarily markets property and casualty coverage. It also conducts life insurance and asset management operations.
I first purchased the stock in July 2010 at $27.12. 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 20.0%.
General Dynamics (GD) is the world's fourth largest military contractor, and also one of the world's biggest manufacturers 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 1.7%. Since that first purchase I have added to my position 7 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 25.3%.
Lockheed Martin Corp. (LMT) is the world's largest military weapons manufacturer, and also a significant supplier to NASA and other non-defense government agencies. LMT receives about 93% of its revenues from global defense sales. I first purchased the stock in July 2011 at $81.04. It has increased its dividend each year and is currently yielding 2.4%. Since that first purchase I have added to my position 4 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 24.8%.
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 2.2%. Since that first purchase I have added to my position 10 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 24.08%.
Raytheon Company (RTN), the world's fifth largest military contractor, specializes in making high-tech missiles, advanced radar systems and sensors, defense electronics, and missile-defense systems.
I first purchased the stock in June 2012 at $49.09. It has increased its dividend each year and is currently yielding 2.2%. 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 30.02%.
Illinois Tool Works Inc. (ITW) is a diversified manufacturer that operates a portfolio of 60 business units that serve industrial and consumer markets globally. I first purchased the stock in October 2008 at $42.39. It has increased its dividend each year and is currently yielding 2.3%. 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 30.02%.
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 are my two stocks with the lowest annualized returns:
United Technologies Corp. (UTX) is an aerospace-industrial conglomerate with a portfolio that includes Pratt & Whitney jet engines, Otis elevators and Carrier air conditioners, among other products. In November 2015, UTX sold its Sikorsky helicopter division to Lockheed Martin. I first purchased the stock in May 2015 at $117.53. It has increased its dividend each year and is currently yielding 2.4%. Since that first purchase I have added to my position 4 times as the stock price continued to increase. Over the period I held the stock, my annualized return is 1.6%.
Exxon Mobil Corp. (XOM), formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company. I first purchased the stock in May 2013 at $90.54. It has increased its dividend each year and is currently yielding 4.0%. 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 (-2.3%).
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 CINF, CG, LMT, MSFT, RTN, ITW, UTX, XOM. See a list of all my Dividend Growth Portfolio holdings here.
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