Great Funds For Growing Dividends

Dividend stocks were once viewed as so boring. My, how things have changed! Today, companies that pay dividends -- and the funds that invest in them -- are the things to own. Manager Donald Kilbride has guided Vanguard Dividend Growth (symbol VDIGX) to market-beating results during a turbulent period for stocks. Over the past five years through June, Dividend Growth, a member of the Kiplinger 25, gained 3.3 percent annualized. That beat Standard & Poor's 500-stock index by an average of three percentage points per year.

Kilbride employs a straightforward dividend-growth strategy. Each of the 48 large companies in his portfolio is a leader in its industry, has a lot of cash and little debt, is run by smart managers and has a long history of hiking payouts. He prefers companies that boost dividends at least 10 percent annually; over the past 10 years, his fund's holdings have lifted their dividends by an average of 14 percent a year. Kilbride tries to balance the higher risk of faster-growing companies with the lower risk of steadier, slower-growing payers. As a result, Dividend Growth tends to outpace the stock market in rocky years and lag when stocks are on a tear.

Source: Chicago Tribune

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