STANDING in line at a midtown deli, I overheard a woman exclaim to her lunchtime companion, "Oh, my! They've raised the soup and half-sandwich special from $2.95 to $3.50 -- and I'm on a fixed income."
She need not be.
If you buy stocks that raise their dividends -- and your income -- regularly, you don't have to survive on the same income every year. You stay ahead of inflation.
Most investors pay too little attention to dividend increases, focusing only on stock gains. But nobody can be certain whether stocks will rise or fall. However, we can predict, based on history, what companies probably will pay shareholders steadily higher dividends over the years.
For example, 10 years ago, Coca-Cola sold for $4 a share, adjusted for splits. On the basis of today's 50-cent dividend, a 1986 investor would now receive a 12.5 percent -- and rising -- return on investment. Coke's dividend climbed 238 percent in the decade. Its stock surged 12-fold.
McCormick & Co. sold in 1986 at an adjusted price of $5 a share. Using today's dividend of 56 cents a share, the locally based spice maker provides a 1986 investor with an 11 percent return. McCormick has increased its payout in nine of the last 10 years and paid dividends for half a century.
Over 10 years, Schering Plough raised its dividend 382 percent, Bristol-Myers Squibb 179 percent, Kellogg 194 percent and Procter & Gamble 120 percent. (Many brokers have lists of consistent dividend-raisers.)
Fleet Norstar, formerly Industrial National Bank, has paid uninterrupted dividends since 1791.
Locally, Baltimore Gas & Electric Co. and Potomac Electric Power Co. have increased their payouts in nine of the last 10 years. Delmarva Power & Light has lagged, raising its dividend only three times in a decade.
Most mutual funds allow you to reinvest dividends automatically, which can help you generate more income.
In his best-seller "Beating The Street," Peter Lynch says, "Stocks do better than bonds because as companies grow more profitable, stockholders share increased profits. Dividends are raised. You can't go wrong with stocks that raised dividends 10 or 20 years in a row."
Where do you find recent dividend increases? The Sun carries the information daily.
"Moody's Handbook of Common Stocks," the fall 1996 edition, is a treasure house of dividend and related information. Most libraries carry this quarterly publication.
Just remember the words of John D. Rockefeller in 1901: "Do you know the only thing that gives me pleasure? It's to see my dividends coming in."
Pub Date: 12/11/96