The Top 40 Dividend Growth Stocks

My friend, Dave Van Knapp of, publishes an annual overview of the dividend-paying stock scene for $40. This year’s edition just came out and Dave was kind enough to send me a copy of Top 40 Dividend Growth Stocks For 2012.

Here’s the table of contents:

In the introduction, Dave says the goal of an income-growth portfolio is simple: “To build a steady stream of rising income.” There are three phases in his process:

Phase one is to identify the best dividend growth companies. Not all companies that pay dividends are good investments. We want only the best.

Phase two is to value the companies so that you can purchase them at favorable prices.

Phase three is portfolio management. It includes everything not covered in the first two phases: How to make timely decisions to buy, sell, hold, or replace stocks; maximize dividend streams; exercise sound risk management; sidestep dividend cuts; and avoid outright loss of capital wherever possible.

Dave has a good track record at winnowing out the best dividend-growers. His 2009 Top 40 stocks delivered an average dividend increase exceeding 5 pct, 2010’s selections averaged 10 pct increases, and last year’s averaged 6.3 pct. Plus, the 2011 gang of 40 increased in price by 8 pct versus the S&P 500’s tiny decline.

After a terrific primer on the benefits of dividend income and buying companies that produce it, Dave outlines the characteristics of the best dividend stocks and then introduces the 2012 Top 40 with “sufficient variety” to “create a well-rounded portfolio” as shown in the following breakdown by sector:

Each of the 2012 Top 40 gets a one-page Easy-Rate Scoresheet for simple comparison, and those follow various lists of the 40 sorted in different ways. Given the many ways of viewing the winners, you’ll have no trouble choosing which are right for your portfolio. The highest projected dividend yield is 6.4 pct and the lowest is 2.7 pct.

Dave closes with thoughts on how to use dividend-growth stocks in retirement planning, relying on a helpful cistern metaphor. He suggests picturing that your retirement assets “reside in a cistern, with pipes bringing assets in and taking them out.” He says your retirement cistern has two goals:

  1. You must be able to draw enough from the cistern to fund your retirement adequately.
  2. The cistern must never go empty. In fact, it must never get even close enough to empty that you lose sleep or worry about the possibility.

With the help of this book, it won’t.

All in all, another fine addition to the annual series. Dave is selling Top 40 Dividend-Growth Stocks For 2012 in PDF form for $40 (a buck a stock). I receive no compensation if you buy it.

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  1. John in Oregon
    Posted March 7, 2012 at 6:07 pm | Permalink

    You know it’s sad that a headline by Barron’s says DOW 15000 by a certain date and they never follow up to say if they were right or wrong. In 2013 they’ll say DOW 17000 or 20000 like they know what they’re talking about and completely ignore an earlier prediction unless by some small chance they were correct. It is very important to do your own thinking and not rely on Barron’s or others. You can be just as wrong as them and not pay for it.

  2. John in Oregon
    Posted March 6, 2012 at 6:07 am | Permalink

    At least for one day AAPL went down. Trend?

  3. Coman Falls
    Posted March 5, 2012 at 12:16 pm | Permalink

    Does APPLE have more upside?

  4. John in Oregon
    Posted February 23, 2012 at 4:08 pm | Permalink

    I want to buy ETFs or Stocks which pay dividends, but I don’t want to lose principal. Please share how principal changed in a year with those choices. Thanks.

    • Posted February 23, 2012 at 5:48 pm | Permalink

      In the past year, VIG gained 5 pct while REM lost 13 pct. Keep in mind that the falling price of REM is partly the reason its yield is high. Also, while the one-year comparison makes REM appear much more volatile than RIG, both fluctuated a lot and, in fact, REM traced out a smoother chart.

      From their July highs to their early October lows, VIG and REM fell 17 pct and 22 pct respectively. Then from their early October lows to now, VIG and REM gained 21 pct and 15 pct respectively.

  5. Haris
    Posted February 18, 2012 at 11:03 pm | Permalink

    I like to have dividends as a part of my investment philosophy, how about those dividend ETFs?

    • Posted February 19, 2012 at 7:05 pm | Permalink

      Interestingly, some of the best ETFs for dividends don’t even say dividend in the name. I like some of the mortgage ETFs for high yield.

      For example, the popular iShares Dow Jones EPAC Select Dividend Index (IDV) yields only 5 pct, Wisdom Tree Total Dividend (DTD) yields just 3 pct, and Vanguard Dividend Appreciation (VIG) yields only 2 pct.

      Meanwhile, iShares FTSE NAREIT All Mortgage Capped Index (REM) yields 11 pct.

      • Haris
        Posted February 20, 2012 at 10:49 am | Permalink

        Thanks for the thoughts. I like the IDV, the REM not so much because its NAV fluctuates a lot.

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