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1. Some companies are healthy, producing dividends
You might conclude that stock dividends are harder to find these days than, say, a credit card company that forgives late payments.
Cash-strapped companies, most notably banks, slashed dividends last year to the tune of more than $40 billion.
It was the worst year ever for dividends since 1956, reports Standard & Poor's.
But there still are solid companies with healthy dividend yields of at least 3 percent, says Chuck Carlson, editor of the DRIP Investor newsletter. That beats the near-zero rate these days on Treasury bills.
Dividends can make a big difference in a portfolio when there is little, if any, stock price appreciation.
In the past 30 years, for example, dividends accounted for 30 percent of the total return of stocks making up the S&P 500 index, says Howard Silverblatt, S&P's senior index analyst.
You figure the yield by dividing the annual dividend by the stock price. Some stocks have huge yields now, but it is only because their stock price has tanked.
Among Carlson's top picks for dividends of 3 percent or more: PepsiCo Inc., Johnson & Johnson, Chevron Corp., Intel Corp. and AstraZeneca, a British pharmaceutical manufacturer that acquired Gaithersburg's MedImmune Inc. in 2007.
The companies, Carlson says, have sustainable earnings, a history of raising dividends and enough cash to keep paying them.
-- Eileen Ambrose
October 10, 2008