Diversified Dividend Aristocrats For The DIY Investor

The debate whether investing in mutual funds and/or exchange traded funds is better than doing your own stock picking has been going on for as long as one remembers. Nor are there any indications that it is going to end soon. The general perception is that investing in funds is a convenient method if one does not have the skill or the time to pick stocks.

There is a fund – exchange traded or not – for practically every niche that you may be interested in. Exchange traded funds (ETFs) are often preferred over mutual funds because of their comparatively low expense ratios – typically in the range of 0.2% to 0.5%. If it is growth stocks that you are interested in, you have the SPDR S&P 500 Growth ETF (SPYG). YTD the fund has returned 26% in addition to a dividend yield of $1.44 at current price.

However, if you are a DIY type of a person and would rather pick your stocks yourself (and also acquire some useful on-the-job investing skills in the bargain), you can look at the all time dividend favorites – investments that have stood the test of time and will never fail you (barring, of course, some periods of downturn).

These stocks are dividend aristocrats with a long history of uninterrupted dividends. What makes these stocks even more attractive is that they bring with them a built-in element of diversification, though not of the level one looks for in diversified funds.

Unilever N.V. (ADR) (UN) is one stock that I think everyone should have in his/her portfolio. The company has an uninterrupted history of paying dividends and at CMP yields 3.54% in addition to an appreciation of almost 60% over five years. However, if you would rather prefer an American company in the same category, one could look at The Procter & Gamble Company (PG). Dividend yield of 2.99% and appreciation of 28%, these two companies have their fingers in god knows how many pies. From Procter & Gamble is present in personal care, beauty, grooming and health, fabric and home care, Unilever sells products for personal and home care and foods and refreshments. Name five products that you think you cannot live without, in all probability, you will find these two selling at least one of them.

3M Co (MMM) is another dividend aristocrat where you cannot go wrong no matter at which level you buy it. The company has paid dividend consecutively for the last 388 quarters and has increased the annual dividend payout for 55 years on the run. The level of diversification this technology company offers is evident from the number of markets it caters to – healthcare, consumer and office, safety, security and protection services, display and graphics and electro and communications. A 2.47% yield may not appear as appealing but one can be sure of a steady and incremental dividend income every year.

Johnson & Johnson (JNJ) is another company that is present in practically every field of healthcare and sells its products in virtually every country in the world. The company yields 2.86% and has been increasing dividends for more than 10 years now.

There are many more such dividend aristocrats such as McDonald’s (MCD), Colgate Palmolive (CL) and Target Corp. (TGT), just to name a few. The three I have chosen have highly diversified profiles matched by very few companies.