The power of dividends is underappreciated by many investors. Solid, consistent dividends often result in market-beating returns for patient investors. Below are five dividend payers likely to keep it up for a long time:
• 3M (NYSE: MMM) makes everything from Post-it Notes to protective films for smartphones. Its recent yield of 2.1 percent is better than you can get from five-year Treasuries, and it has been paying its dividend for 97 years.
• Colgate-Palmolive (CL), making staples such as toothpaste and pet food, is growing and profitable. Recently yielding 2.2 percent, it has paid a dividend for 118 years.
• Procter & Gamble’s (PG) “50 Leadership Brands” include Bounty, Charmin, Gillette, Crest and Tide. It recently yielded 3 percent and has been paying dividends for 123 years.
• DuPont (DD) is a giant in chemicals and agriculture. The maker of plastics and other engineered materials recently offered a 3 percent yield and has been paying dividends since 1904.
• Stanley Black & Decker (SWK) recently yielded 2.6 percent and has been paying dividends for 137 consecutive years. It’s poised to benefit from an upturn in the housing market.
These companies are not the fastest growers around, but they can reward you over time with their reliable and growing dividends. (The Motley Fool’s newsletters have recommended Procter & Gamble and 3M.)
Ask the Fool
Q: What are mortgage “points,” and is it smart to pay them? – J.M., Bixby, Okla.
A: A point is 1 percent of a mortgage loan. On a $200,000 loan, one point would be $2,000.
There are “origination” and “discount” points. Origination points are sometimes charged for originating, or launching, your mortgage. Paying discount points, which lowers your interest rate (and thus your payments), is optional. The idea is that if you cough up a little extra money at the beginning, you can pay less over time. The more points you pay, the lower interest rate you get.
It’s not always worth it, though. Whether you should pay points depends on how long you expect to stay in the home. If you pay a few points and then sell your home after two years, you’ll have enjoyed lower monthly payments due to the lower interest rate, but the savings probably won’t have made up for the points you paid. For example, if you pay $4,000 in points to save $50 per month, it will take you 80 months, about 6 1/2 years, to break even.
Try out various scenarios with online calculators at fool.com/calcs/calculators.htm and bankrate.com/calculators.aspx.
Q: I know that many index funds, like the Vanguard S&P 500 fund (VFINX), focus on the U.S. stock market. But which ones will expose me to the rest of the world? – E.S., Morrisville, N.J.
A: There are many, such as funds based on the Vanguard European Stock Index (VEURX), Vanguard Pacific Stock Index (VPACX), Vanguard Emerging Markets Stock Index (VEIEX), Fidelity Spartan International Index (FSIIX), and iShares MSCI EAFE Index (EFA). You can diversify into bonds, too, with funds such as the Vanguard Total Bond Market II Index (VTBIX).
My dumbest investment
My worst move was listening to expert advice. After experiencing some losses, I decided to use the services of a fancy private banking stock service. On the advice of my “stock expert,” I sold positions that were winners because I was too heavily loaded on them.
I had 20 percent of my $500,000 portfolio in Apple stock at an average cost of $44 and was persuaded to sell around $88. I refuse to calculate what 2,100 shares at around $500 apiece would be worth today. – L., online
The Fool responds: It’s true that many so-called experts may not be too smart or may have conflicts of interest, not always keeping your best interests in mind. Still, it is sensible to not have too much of your portfolio riding on any one stock, as even solid companies can falter.