04/2020 KIPLINGER’S PERSONAL FINANCE 37THE PAST 12 MONTHS HAVE BEEN GOOD
ones for U.S. stocks, and the Kiplinger
Dividend 15—our favorite dividend-
paying stocks—have risen right along-
side the broad market. Over the past
year, the average return of the stocks
on our list and that of Standard &
Poor’s 500-stock index are an identical
21.7%. After the run-up, our list still
sports a healthy 3.5% average dividend
yield, compared with 1.9% for the S&P
500 and 1.5% for the 10-year Treasury
note (prices, returns and other data
are through January 31).
Alternative-asset manager BLACK-
STONE GROUP was the runaway winner
among our picks, having returned
26.2% since our last update, bringing
its one-year total return to an eye-
popping 86.9%. The firm saw a 21%
boost in assets under management in
2019, to $571 billion. Blackstone pays a
variable dividend and currently yields
4.0%. That’s well below it’s five-year
average yield of 7.0%, but we doubt
many investors who held the stock
during the recent run are complaining.On our watch list. Shares of industrial
giant 3M plunged 17.9% over the past
year and now sit 37% below their 2018
high. Cyclical slowdowns in the auto-
motive and consumer electronics mar-
kets—both of which include major
buyers of 3M’s products—have crimped
earnings of late. 3M is restructuring
and cutting costs in order to rebound
strongly once these beaten-down mar-
kets bounce back, says Mairs & Power
Balanced fund manager Kevin Earley.
More concerning is that 3M is among
the companies facing lawsuits sur-
rounding the manufacture of chemical
substances, used in products such as
fire-retardant foams, that have alleg-
edly contaminated water supplies.
Earley figures that the litigation ac-
counts for some $15 billion to $20 bil-lion in lost market value for 3M since
mid 2018.
Whether ongoing legal battles and
potential cleanup costs will prove
more damaging to 3M (or its payout)
remains to be seen, and we’ll keep
a close eye on it. In the meantime,
3M still boasts a strong balance sheet
and generates plenty of cash. The
firm raised its payout 2% in February,
marking its 61st annual dividend hike.
Shares of EXXONMOBIL shed 10.6%
over the past 12 months as falling oil
and natural gas prices have eaten into
the firm’s earnings and cash f lows. Theenergy behemoth is investing heavily
in new operations that it expects will
boost earnings a few years down the
line, but more immediately, Exxon
lacks sufficient free cash f low (cash
profits left over after spending to main-
tain and expand the business) to cover
its ample payout. Analyst Stewart
Glickman at investment research firm
CFRA expects Exxon to fund its divi-
dend over the short term through debt
and sales of non-core assets. The firm
has historically maintained a clean
balance sheet and diligently paid down
debt, he says. It’s worth noting that the
company continued to raise its divi-
dend even as oil prices fell by more than
70% between mid 2014 and early 2016.
Exxon hiked its payout by 6% last year;
the shares yield 5.6%. RYAN ERMEY
[email protected]THE KIPLINGER DIVIDEND 15: BY THE NUMBERSCompany (s ymbol)Share
priceDividend
yieldAnnual
dividend*Consecutive
years of
increases5-year
dividend
growth
rate†1-year
total
return
DIVIDEND STALWARTS Companies in this category have raised dividends for at least 20 straight years.
3M (MMM) $ 1 5 9 3. 7 % $ 5. 8 8 61 7. 5 % –1 7.9 %
Air Products & Chemicals (APD) 239 2.2 5.36 38 12.3 48.0
Emerson Electric (EMR) 72 2.8 2.00 62 1.3 12.4
ExxonMobil (XOM) 62 5.6 3.48 37 4.8 –10.6
Johnson & Johnson (JNJ) 149 2.6 3.80 57 6.3 14.7
Procter & Gamble (PG) 125 2.4 2.98 63 3.0 32.3
Walmart (WMT) 114 1.9 2.12 45 1.6 21.7
DIVIDEND GROWTH Companies in this category should continue a history of robust dividend increases.
AbbVie (ABBV) $81 5.8% $4.72 7 24.2% 6.4%
Home Depot (HD) 228 2.4 5.44 10 23.7 27.3
Lockheed Martin (LMT) 428 2.2 9.60 17 9.9 50.9
Texas Instruments (TXN) 121 3.0 3.60 15 21.5 23.2
HIGH YIELD Companies in this category have a five-year average yield of 4% or more.
Blackstone Group (BX) $61 4.0% $2.44 1 –4.8% 86.9%
Enterprise Products Ptnrs. (EPD) 26 6.9 1.78 22 3.8 –0.5
R e a lt y I n co m e (O) 78 3.6 2.79 25 4.2 18.1
Verizon Communications (VZ) 59 4.1 2.46 13 2.3 12.4
INDEX
S&P 500-STOCK INDEX 1.9% $48.60‡ 12 13.6% 21.7%Picking some stocks from each of the groups below will give you a mix of dividend income
and growth.As of January 31. *Annualized based on the most recent dividend. †Annualized. ‡The weighted sum of dividends paid by
companies in the index. SOURCES: Company websites, Morningstar, S&P Dow Jones Indices, Yahoo Finance.THE KIPLINGER DIVIDEND 15 UPDATE2 Picks Hit a Rough Patch