Facebook
Twitter
Despite the recent pullback, 2014 was another good year for stocks.
The S&P 500 rose to new heights, topping 2,000 for the first time ever. With two weeks to go in December, the NASDAQ is up more than 11%. Initial public offerings hit a decade high.
For the most part, the good times kept rolling on Wall Street. But with short-term interest rates entering their seventh consecutive year near zero, investors continued to flock to dividend stocks as a safety net for if and when (read: when) the market takes a sour turn. The SPDR S&P Dividend ETF (SDY) is up nearly 10% year to date.
More than four-fifths of S&P 500 companies now pay a dividend. So if you’re buying a large-cap U.S. stock, there’s a better than 80% chance it pays some sort of dividend.
As with non-dividend payers, some dividend stocks performed much better than others this year. A number of them performed extraordinarily well.
The term “dividend stock” is quite broad. Basically, any stock that pays any sort of dividend – however small – qualifies.
So in whittling down the list of the best-performing dividend stocks of 2014, I only considered stocks that paid dividend yields of 2% or more. In other words, stocks that offer a dividend higher than the 1.9% yield of the average S&P 500 stock.
Also, I stuck to S&P 500 stocks – large-cap dividend payers that you’re likely to buy, and whose dividends seem safe, not a temporary mirage designed to entice income-seeking investors.
With those parameters – and with two weeks still to go in the trading year – here were the five best performing dividend stocks this year.
Best Dividend Stocks 2014: Top 5
Intel (NASDAQ: INTC)
The largest company on the list with a $173 billion market cap, Intel has had a remarkable year.
Shares of the world’s largest semiconductor chip maker have shot up 38% in 2014. The rise of cloud computing and increasing growth in the Chinese mobile market have helped propel Intel to its most profitable year since 2011, and its second-best earnings per share ever. The company’s dividend held steady at $0.90 annually, and the yield remains a respectable 2.5% despite the huge run-up in the stock price.
Altria (NYSE: MO)
This $98 billion tobacco company has long been a prominent dividend payer, and has the 4.2% yield to prove it. This year, however, the stock performed much better than its low (0.71) beta would imply, rising more than 30%. Revenues have improved steadily from a year ago, and the company used some of that money to increase its dividend payout from $0.48 to $0.52 – the fifth straight year of a dividend increase of at least three cents.
Eli Lilly (NYSE: LLY)
Shares of this pharmaceutical giant continued to rise in 2014.
The stock is up 38% this year, bringing its five-year return to more than 95%. The good times should keep rolling into 2015, as the company recently announced its first dividend increase since 2008. In February, Eli Lilly will raise its quarterly dividend a single penny, from $0.49 to $0.50. Despite the absence of dividend growth in recent years, the stock still boasts a respectable 2.8% yield.
Dr Pepper Snapple Group (NYSE: DPS)
Investors have been drinking in this beverage conglomerate of late.
DPS shares are up a whopping 45% year to date as the company has proven more cost-efficient than larger rivals Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP). The rapidly rising dividend may also have been part of the appeal to investors. For the fifth straight year, Dr Pepper Snapple increased its dividend, this time from $0.38 to $0.41.
DPS has now raised its dividend 173% since 2009, when the company first initiated a quarterly dividend payout at $0.15 per share. It currently offers a yield of 2.3%.
Reynolds American (NYSE: RAI)
Yep – another cigarette company.
Shares of Reynolds are up more than 27% this year as a $25 billion merger with rival Lorillard is in the works. The two tobacco giants will hold a special shareholder vote on the proposed merger in late January.
Reynolds, the No. 2 tobacco company in America behind Altria (owner of Philip Morris), makes Camel, Pall Mall and American Spirit cigarettes. Lorillard sells Newports, Mavericks and Kents. As part of the deal, the companies plan to sell several of their brands, including Kool, Maverick and Salem, to get federal regulators off their backs about a potential antitrust violation.
The merger has been good publicity for Reynolds. Meanwhile, its dividend keeps chugging along, up to $0.67 from $0.63 this year. The yield currently stands at a very healthy 4.2%.
Collect Dividend Income Every Month!
We’ve put together a simple calendar that pulls together all the market’s best dividends into a single, easy-to-read document. One look, and you’ll be able to set up a 12-month dividend stream for regular income every month. Click here to see the full details.