Kraft Foods Group Inc (KRFT), General Electric Company (GE): The Ultimate Dividend Growth Portfolio

Lorillard’s main brand, Newport, has proven to be very popular. The company has been growing revenue and earnings, and the stock offers a dividend yielding 5.33%. In a previous article I determined that Lorillard Inc. (NYSE:LO) was the best tobacco stock out there, blowing away the competition on pretty much every dividend-related metric. The dividend has grown from $0.61 annually in 2008 to $2.07 annually in 2012, an annualized rate of 35%. The payout ratio has become a bit high at about 73.6% in 2012, but for a cigarette company that doesn’t need to invest very much back into the business this seems perfectly fine.

From the table above the dividend needs to grow at about 2.5% per year, and it looks like Lorillard should have no problem with that. The company has been buying back shares as well, which should help the cause. The company’s first dividend of 2013 jumped by 6.4%, so Lorillard looks poised to deliver more than enough dividend growth in the future.

Based on the current share price I can add 121 shares of Lorillard Inc. (NYSE:LO) to the portfolio for a total cost basis of $4,991.25. The annual dividend income from this position is $266.20 based on the current quarterly dividend.

Next time

So far four of twenty stocks have been added to The Ultimate Dividend Growth Portfolio, and next time I’ll detail four more outstanding dividend growth stocks. Until then, here’s what the portfolio currently looks like.

Created with infogr.am

Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company (NYSE:GE).