5 Dividend Stocks for This Market

What’s better than a company that pays a steady dividend? A company with a history of increasing dividends, year in and year out. While there’s no guarantee their shares won’t decline, a dividend payment can mitigate losses. And companies that increase dividends usually can withstand economic shocks, says Gary Stroik, coauthor of the book "All About Dividend Investing." Even in difficult times, they tend to be managed well enough to return a growing amount of cash to shareholders—kind of like getting a pay raise every year. Standard & Poor’s calls such companies “aristocrats,” and they’ve lived up to their name. While the S&P lost 9 percent (including reinvested dividends) over the past decade, the aristocrats gained 44 percent.

Of course, that’s not to say dividend stocks are a sure bet. Dividend stocks tend to lag in the early stages of a bull market, when investors gravitate to more growth-oriented names. And as corporate profit growth slows, a slowdown in dividend increases looks inevitable. Still, the market decline has led to some impressive dividend yields, especially compared with what money-market funds and short-term government bonds are offering.

We looked for stocks with a steady history of increasing their dividends, solid balance sheets and good prospects to keep the cash flowing to shareholders. For added safety, we took a look at dividend-coverage ratios to make sure the companies had enough cash to pay their dividends—and still invest in their businesses. Think of them as tortoises for your portfolio; they may not be the quickest stocks out of the gate, but their slow, steady gains should ultimately win the race.