The best dividend stocks don't always come with incredibly generous yields. Excessive dividend yields are often a sign of deeply troubled stocks, often overvalued and destined to lose that tremendous payout fairly soon. Seasoned income investors know that they should look for other qualities. A reasonable yield is a good start, but a strong commitment to growing payouts over time is much better. If the dividend checks are financed by rock-solid cash flows, that's even better. And in the end, the underlying business should be poised to deliver these growing, cash-backed dividends for a very long time.
Read on to see how International Business Machines (NYSE:IBM) and American Tower (NYSE:AMT) fit the bill as world-class dividend stocks, each in its own unique way. Big Blue recently joined the exclusive club of Dividend Aristocrats. A symbolic payout increase from $1.62 to $1.63 per share ensured that IBM's payouts have been rising without interruption for 25 straight years. The dividend checks have actually been sent out every quarter since 1916, with a few bumps along the way. Cell tower operator American Tower is a different story. Organized as a real estate investment trust (REIT), American Tower is required to pay out at least 90% of its taxable income in the form of dividends, in order to qualify for blanking out its corporate tax payments. REITs send their excess cash directly to shareholders rather than to Uncle Sam.
Source: Motley Fool
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