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The Beauty Of Increasing Dividends

31 August 2010 One Comment

Altria Group, Inc. (MO) announced recently that they are increasing their quarterly dividend by 8.6% from $.35 a share to $.38 a share or from $1.40 annually to $1.52 annually. Altria continues its practice of increasing their dividend payout every single year as it has done since 1970.

As the economic data deteriorates and more people buy in to the idea that we are actually in an economic depression versus a typical business cycle recession, I believe that the focus will increasingly turn towards dividends, income, and capital preservation versus speculation and share price appreciation. Stocks like Altria will continue to gain attention because of the income characteristics, event while Altria faces continued litigation risks domestically with Philip Morris USA.

Personally, I like Philip Morris Int’l (PM) better than Altria since there is actual growth in some international markets and some areas of the globe are without the litigation risks that the developed markets come with. Philip Morris Int’l also is dedicated to increasing its dividend payouts.

Both Altria and Philip Morris respresent companies that have the following characteristics:

1. A track record of increasing dividends year after year
2. Recession-resistant businesses that produce immense cash flows

In my opinion these are the companies that must make up the bulk of your portfolio in today’s economic environment.

McDonalds Corporation (MCD) and Wal-Mart Stores, Inc. (WMT) are two other stocks that I like moving forward.

New investors should consider using DRIP plans to directly invest in these companies over time and allow the dividends to reinvest and build their position. DRIPs offer a low-cost method of investing that makes it easy for young investors to build positions of quality companies over time. Since you’re focused on building a position, it also removes the risk of unloading your position based on short-term feeling and thinking.

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