The strong and stable stocks offering a reliable income

Companies with a consistent record of rising payouts look especially attractive at present. Dr Mike Tubbs introduces his favourite “dividend aristocrats”.

Nothing beats cold hard cash. In bull markets, investors are busy chasing rising stock prices; when the cycle turns, they rediscover the appeal of a steady dividend. No wonder. Reinvested income accounts for the vast majority of long-term returns. As the latest annual Barclays Equity Gilt Study notes, a £100 stake on UK equities in 1945 would have been worth £6,294 in real terms at the end of last year, assuming the gross income had been reinvested every year. Without dividend reinvestment, the £100 would barely have tripled after inflation. Now that global markets are wobbling, defensive stocks offering safe dividend yields and the prospect of at least some share-price growth are especially sought after.

That combination appeals more than cash accounts offering paltry interest rates, especially as British income stocks look historically cheap (see bottom).

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CompanySectorYield on 18/1/19Successive years of increased dividendsAnnualised total returns for last
ten yearsthree years
ChevronOil & Gas3.92%297.8%16.1%
Consolidated EdisonUtility3.79%429.8%7.8%
Coca-ColaBeverages3.28%5610.5%7.8%
Procter & GambleHousehold & personal care3.15%627.2%10.2%
James HalsteadMaterials2.97%4119.1%6.8%
3MDiversified2.78%6015.1%14.9%
Johnson & JohnsonPharma2.75%5410.6%13.2%
Johnson MattheyChemicals2.67%3114.5%11.1%
Cincinnati FinancialFinancials2.64%5714.5%16.4%
SageSoftware2.61%2815.6%6.8%
DoverEngineering2.35%6315.1%24.9%
McDonald'sFood2.30%4213.6%19.0%
MedtronicHealth2.25%4011.8%7.9%
Automatic Data ProcessingOutsourcing2.19%4415.4%22.3%
HalmaElectronics1.07%3923.2%22.2%
Dr Mike Tubbs

Highly qualified (BSc PhD CPhys FInstP MIoD) expert in R&D management, business improvement and investment analysis, Dr Mike Tubbs worked for decades on the 'inside' of corporate giants such as Xerox, Battelle and Lucas. Working in the research and development departments, he learnt what became the key to his investing; knowledge which gave him a unique perspective on the stock markets.

Dr Tubbs went on to create the R&D Scorecard which was presented annually to the Department of Trade & Industry and the European Commission. It was a guide for European businesses on how to improve prospects using correctly applied research and development. He has been a contributor to MoneyWeek for many years, with a particular focus on R&D-driven growth companies.