Dividend Investing Ideas Center
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For dividend investors, yield is one of the most important factors to consider when making an investment. Dividend yield can make or break the attractiveness of a dividend stock. In many cases, companies will have dividend yields that are similar to their peers, but that is not always the case. Check out the chart below to see how the stocks you own measure up with their sector averages.
Looking further, we present a dividend yield comparison by sectors and individual companies compared to the average dividend yield of their respective market segment. In addition, those companies that have been truly committed to their investors in the form of dividend increases by raising their dividend every year for 25+ years are highlighted below.
The basic materials sector consists of several components including oil and gas, metals, chemicals, construction materials, forest, wood and paper products. Companies within the sector generally provide other companies with goods obtained from the earth, with varying amounts of processing. These companies tend to do well during a strong economy, but can fall during an economic downturn. Companies in the sector are also very driven by commodity prices and can be directly impacted by their performance, so these stocks tend to go through cycles of booms and busts.
The basic materials sector has an average stock dividend yield of 4.92%, while basic material stocks in the S&P 500 have an average yield of 2.5%. The highest yielding industries in this basic materials sector are Oil & Gas Equipment & Services and Oil & Gas Refining & Marketing. Both of these industries have average yields over 5%.
Both ExxonMobil (XOM ) and Sherwin-Williams (SHW ) from this sector have proven dividend reliability by increasing their dividends for over 25 years in a row. For investors seeking monthly paying stocks, Vanguard Natural Resources (VNR) and Linn Energy (LINE) are both high yield monthly dividend payers in the basic materials sector, although they tend to be much more volatile than the larger, lower-yielding stocks in the sector. Nearly all Master Limited Partnerships are located within the basic materials sector, which skews the sector’s average yield to the upside.
Products in the consumer goods sector include all products that are purchased by consumers rather than manufacturers and businesses. The types of products in this sector range from auto parts to food products to paper products to apparel. Since this sector is directly affected by consumer spending, it typically sees substantial growth in a strong economy, but declines in a weak economy.
The consumer goods sector can be split into two categories: cyclical and non-cyclical. Cyclical consumer goods include products and services for consumer use, including airlines, entertainment, restaurants and toys. Non-cyclical goods include products that are typically less affected by the business cycle. These goods include food, drinks and tobacco.
The average dividend yield in the sector as a whole is 2.22%, while the average consumer goods yield for stocks listed in the S&P is 2.5%. The highest yielding industry within this sector is the cigarette industry, which is well known for its high yields. Check out Why Tobacco Stocks Can Make Good Dividend Investments for more information on these stocks.
The financial sector includes several money-related industries, including banks, savings and loans, insurance and real estate. The average yield for the financial sector is approximately 4.17%, while the average yield for financial services companies in the S&P 500 averages much lower at 2.5%. The average dividend yield for the sector as a whole remains high due to high yields in the Real Estate Investment Trust (REIT) industry and real estate development stocks.
These high yielding industries are offset by low yielding industries like money center banks and accident/health insurance. Although money center banks historically had attractive yields, these banks have yet to restore their dividends since the financial crisis of 2008-2009. See Also: History of Bank Stock Dividends: Still Little Recovery from Financial Crisis.
There are 13 companies in the sector that have consistently increased their dividends over the past 25 years, including T. Rowe Price (TROW ), AFLAC Incorporated (AFL ) and Franklin Resources (BEN ). For investors seeking monthly paying dividend paying stocks, the financial sector has over 200 stocks that pay monthly.
The healthcare sector is compiled of companies dealing in biotechnology, pharmaceuticals, healthcare providers, medical products, medical devices and supplies. On average, companies in the healthcare sector have a 2.28% dividend yield and healthcare companies in the S&P 500 have a 1.75% dividend yield.
There are seven companies within this sector that have increased dividends for 25 consecutive years, including Johnson & Johnson (JNJ ) and Abbott (ABT ). The sector itself is not known for having impressive yields, but the companies below have proved that they are committed to being consistent dividend payers.
The industrial goods industry includes companies that manufacture or service industrial products. In general, the industry as a whole tends to underperform the wider market, or outperforms for very short periods of time. The average dividend yield for companies in the industrial goods industry is just 1.76%, and 2% for industrial stocks in the S&P 500.
The services sector includes companies that typically produce or sell intangible goods, big-box retailers, and shipping companies. The sector is compiled of industries including business services, restaurants, grocery stores and lodging. This sector is also the provider of the majority of jobs in the United States. The average dividend yield for the services sector is 2.37%, while the average yield for service companies in the S&P 500 is 2.0%. As shown below, the shipping industry yields well above the other industries in the sector. This high average yield is primarily due to high yielding international tanker companies including Nordic American Tankers (NAT ) and KnightsBridge Tankers (VLCCF).
For investors seeking steady dividend payments, there are two companies in the sector that pay regular monthly dividends: Shaw Communications Inc (USA) (SJR ) and Student Transportation Inc (STB). There are also 13 companies in the services sector that have increased dividends for at least 25 consecutive years, including Wal-Mart (WMT ), McDonald’s (TGT ) and Target Corporation (TGT ).
The technology sector includes several industries including telecommunications, IT services, semiconductor manufacturing, software, data hosting services, biotechnology, and scientific research. On average, companies that are in this sector have a dividend yield of 3.2%, while technology companies in the S&P 500 have an average dividend yield of just 1.5%.
Many dividend investors do not look to technology stocks due to their high volatility. Historically, tech stocks have not been known to be great dividend stocks, as many tech companies prefer to invest cash back into their businesses rather than pay a dividend. This trend has changed in recent years, however, as many former high-growth tech companies have accepted a slower growth trajectory and started to focus more on rewarding shareholders with dividends and buybacks. For additional overview on tech stocks that pay dividends, take a look at 10 Big Tech Stocks That Pay A Dividend.
There are only three companies in this sector that have paid increasing dividends every year for at least 25 years, namely AT&T Inc. (T ), Automatic Data Processing (ADP ) and Telephone & Data Systems, Inc. (TDS ).
The utilities sector is broken into electricity, gas, and water utilities. Companies in this industry require a large amount of infrastructure and therefore hold large amounts of debt. When interest rates go up or down, debt payments will increase or decrease accordingly. Therefore, the sector generally performs best when interest rates are low. Historically, dividend investors tend to be attracted to utility stocks due to their high yields. For dividend comparison purposes, utility stocks have a 3.96% average dividend yield, while utility stocks in the S&P 500 have a 3.7% average yield.
This high yielding industry has 13 companies that have increased their dividend for at least 25 years, including Consolidated Edison, Inc. (ED ) and American States Water Co (AWR ). These companies have been able to maintain attractive dividend yields, with the exception of natural gas exploration company Energen Corp (EGN), which is visibly lower than its peers, yielding below 1%.
With the exception of the basic materials and financial sectors, which have MLPs and REITs skewing their average yields, the sectors generally have an average yield that is in-line with the average yield of their industries. A dividend comparison of each sector is essential to truly see how a specific stock compares to its peer.
The “25 Year Dividend Increasers” charts above do not highlight the highest yielding stocks of each sector, but instead present some of the most reliable dividend payers. A stock that has a dividend yield well above (or below) its industry average may have that yield for a reason. It is important to always research a stock before making an investment. A safe and reliable dividend can be a much better choice for dividend investors than a high yield stock that could cut its dividend at any time.