Apple Inc. (AAPL), Berkshire Hathaway Inc. (BRK.A): Do High Dividend Payers Perform Better?

Group 4: Companies currently paying a dividend and with positive three-year dividend growth rates

As I mentioned before, this is the second-best performing group of the four. These 315 companies (the largest of  all four segments) pay an average yield of 2.5% compared to approximately 2.1% for the S&P 500 index, and while they lagged Group One (the non-dividend payers) in price appreciation, they overtook Group One on a total-return basis. The dividend growers averaged total return gains of 21% compared to the average price/total return of 20% among the non-dividend payers.

My favorite pick among this 315 companies is Altria Group Inc (NYSE:MO), which pays a 4.8% dividend yield and has been growing its dividend by 8.6% in the last three years. Altria Group Inc (NYSE:MO) is a strong global consumer-goods company. As such, it is a collection of sustainable cash-rich businesses. Besides, its interests are not only in the tobacco business but also, among others, in the beer business: Altria owns +28% of the world’s second-biggest brewer, SABMiller.

Trading at 2013 15x P/E, the parent company of Philip Morris USA, U.S. Philip Morris Capital, is a great value bet among the dividend growers.

Bottom line

The fact that the two best-performing groups in the study were those companies with recently declared dividends and those companies that have a long history of paying and growing their dividends highlights the importance of dividend payments to achieve total returns. I have long favored those companies that not only pay dividends but that also have shown consistent and sustainable dividend growth. That said, sometimes companies without a dividend history can also be valuable investments. Berkshire Hathaway Inc. (NYSE:BRK.A) is the epitome of such cases.

The article Do High Dividend Payers Perform Better? originally appeared on Fool.com and is written by Federico Zaldua.

Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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