At Woodard and Company, we often get questions about how to get an income stream that keeps up with inflation. U.S. Treasuries offer the security of a guaranteed income stream, but not an inflation adjustment. Once the investor locks in a ten-year Treasury at the current rate of roughly 2%, that 2% never increases for the duration of the Treasury bond. Sadly, inflation eats away at investors’ purchasing power from the income they receive from Treasuries.
Corporate America offers a solution in the form of dividend increases that generally keep up with and even outpace inflation. But for this promise of increased purchasing power over time, the investor incurs risk. The first risk comes from potential drops in the price of the stock that the investor purchased. We all know how the market can swing from crisis to crisis. The second risk is that the dividend may be cut or even dropped altogether. U.S. Treasuries, of course, don’t face such a possibility.
So what we recommend is investing in companies that have the potential to grow their dividend over time. Below is a list of the top ten companies in the S&P 500 with the biggest percentage dividend increases from 2012 to 2015 (through October 31, 2015). All data is from Morningstar.
Keep in mind, we are certainly not recommending every one of these stocks, just offering this as a starting point for your own research. The past is definitely not an assurance of future results.