Higher Yields Come With Patience, Time (Kerry Watkins-Bradley Commentary)

Would you like your stock portfolio to yield 6 percent, 10 percent or even 15 percent? With the S&P 500 currently yielding 1.8 percent, you might think those higher yields are impossible.
Well, they’re not, but to reap yields like that, it takes time, patience and an eye for financially strong companies.
At Garrison Asset Management we research stocks and bonds day-in and day-out.
Then we construct portfolios with what we believe are the best investments to deliver healthy returns without taking on undue risk.
When building a stock portfolio, we strongly believe part of a portfolio should be invested in companies that pay a healthy dividend.
The trick to getting part of your stock portfolio to yield those enviable returns is to find financially strong, well-managed companies that have the ability to raise their dividends on a consistent basis.
Many of these companies can be found among the “blue chip” stocks we all know about, but they can also be found in smaller companies.
For example, Procter & Gamble has paid a stable dividend since 1890. That’s right — the company has paid dividends steadily for the past 116 years.
Some people might think that’s boring, but over the past 15 years, P&G has returned 15 percent annually, turning an initial $10,000 investment into more than $80,000 today.
Even though stalwarts like this temporarily decline over a short-term time horizon, owners still get the dividend payment, which helps investors be patient and calm (two of the primary traits of being a great investor).
I want to share with you a story of a man I know who purchased $300 worth of Pfizer back in 1965. He made a few additional investments of $300 before discontinuing his investment and just relied on dividend reinvestment to increase his holdings.
His out of pocket investment totaled $2,100. After six stock splits and 40 years of raising dividends, his investment has grown to more than $139,000.
The dividend yield on his cost is a whopping 52 percent. Now this is an extreme case due to the length of time, but even with holding periods of 5 to 10 years, the numbers can dramatically impact your portfolio.
Below is a list of companies that have grown their dividend consistently over the years and had you purchased them 10, 20 or 30 years ago, your yield might be much more than what you can get on even the riskiest of bonds.
Many terrific companies pay generous dividends and hike them on a regular basis.
If you buy shares of some of these companies today and hang on for the long haul, they can effectively be paying you dividend yields greater than 20 percent by the time you retire.
Always keep in mind that paying a dividend doesn’t tell you everything about a company on its own.
A fat payout figure can even be a bad sign, if it’s the result of a stock price that’s hit the skids, or if an examination of the company’s cash flows indicates that its payout is unsustainable.
In this day and age of corporate malfeasance, no company is worthy of purchasing and putting in the lock box for 20 years. However, keeping a watchful eye on those you do own can help you hold on to some of tomorrow’s big yielders.
(Kerry Watkins-Bradley is a equity portfolio manager with Garrison Asset Management of Fayetteville. E-mail her [email protected].)