1st Quarter 2014 1

BUYER’S GUIDE TOBUYER’S GUIDE TO

THE BESTTHE BESTDIVIDEND DIVIDEND AND INCOMEAND INCOMEINVESTMENTSINVESTMENTS

1st Quarter 20141st Quarter 2014

NEWSLETTERS

BOOKS

1st Quarter 2014 3

Table of contents

Cashing in on cash fl ow ..................................................... 5

Seeking yield via dividend growth ..................................... 6

Win with consistent income .............................................. 8

Dividends growing with more in store ............................. 10

In search of dividend growth ........................................... 12

Should you buy high-yield stocks? .................................. 13

Limit risk, keep the return ............................................... 14

Small stocks for income investors .................................... 16

Playing the yield fi eld ....................................................... 17

How to build a portfolio ................................................... 20

Diversifi cation with dividends ......................................... 22

To gauge dividends, look at payout ratio ......................... 24

Pick big dividend growth over high yield ........................ 26

Income options for the Dow ............................................ 27

Finding safe, growing dividends ...................................... 28

Utility ratings ................................................................... 30

Utility Q&A ...................................................................... 32

Utilities safer in numbers ................................................. 34

Dividends every month .................................................... 36

Not your father’s DRIPs .................................................... 38

ETFs with high yields, low costs ...................................... 40

Directory of no-load stock programs ............................... 41

Dividend aristocrats ......................................................... 44

Munis less taxing .............................................................. 46

Alternatives to bond funds ............................................... 49

Directory of dividend information for S&P 500 stocks ... 50

12 1st Quarter 2014

In search of dividend growth

TOP DIVIDEND PLAYS Div. 5-Yr. Ann. Payout Est. L-TCompany (Price; Ticker) Div. Yield Div. Growth Ratio Profit Growth SectorDividend growersAccenture ($82; ACN) $1.86 2.3% 28% 44% 10% TechnologyBlackRock ($316; BLK) 6.72 2.1 17 43 14 FinancialsCSX ($29; CSX) 0.60 2.1 20 32 11 IndustrialsDeere ($91; DE) 2.04 2.2 13 22 9 Industrials

Helmerich & Payne ($84; HP) 2.50 3.0 36 44 8 EnergyMicrosoft ($37; MSFT) 1.12 3.0 16 41 8 TechnologyNorfolk Southern ($93; NSC) 2.08 2.2 12 38 12 IndustrialsWalgreen ($57; WAG) 1.26 2.2 23 39 13 Cons. Staples

High-yield stocks Aflac ($67; AFL) 1.48 2.2 9 24 7 FinancialsBoeing ($136; BA) 2.92 2.1 4 45 11 IndustrialsIntel ($26; INTC) 0.90 3.5 12 48 11 TechnologyJ.P. Morgan Chase ($58; JPM) 1.52 2.6 -3 25 6 Financials

Medtronic ($57; MDT) 1.12 2.0 12 29 7 Health CareTravelers ($91; TRV) 2.00 2.2 10 27 9 FinancialsU.S. Bancorp ($40; USB) 0.92 2.3 -13 31 6 FinancialsWells Fargo ($45; WFC) 1.20 2.6 -3 32 8 Financials

We don’t make investment decisions based solely on dividend yield. But that doesn’t mean we dislike dividends. In truth, we love dividends, assum-ing they are well covered by earnings and likely to grow over time. While we typically don’t recommend any stocks with 4% yields, we’re fi nding ap-pealing stocks with solid yields that can afford to keep boosting the payout. Our highest-yielding recommended stocks typically have payout ratios below 50%, meaning they pay out less than half of their profi ts in divi-dends. The lower the payout ratio, the more fl exibility the company has to tackle fi nancial or operating problems — without cutting the dividend.

The table below lists stocks with a history of dividend hikes and the wherewithal to continue growing the payout. Below those dividend grow-ers, we also present attractive picks that yield 2.0% or higher. Below, we review a notable pick. U.S. Bancorp ($40; USB) has more than quadrupled its quarterly dividend from the $0.05 it paid during 2009 and 2010. While the divi-dend hasn’t climbed to prerecession levels, U.S. Bancorp’s payout ratio of 31% suggests more growth is in store. The company is augmenting its dividends with share buybacks.

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Investors in common stocks may pay a steep opportunity cost for fl ee-ing to the safety of 10-year Treasury notes, which pay a miserly 2.8% yield.

Low money-market and bond yields are encouraging income investors to explore other pastures. And while the Forecasts favors common stocks with decent yields and strong dividend-growth potential, we occasion-ally write about preferred stocks, master limited partnerships (MLPs), and royalty trusts. These asset classes are very different from traditional common stocks, and not only because they often pay yields of more than 5%. Here are a few other things to consider about each investment vehicle before going after the income:

MLPsMLPs collect cash fl ows from tangible assets, such as real estate or

energy pipelines. MLPs are run by general partners, who typically own a small stake in the entity. Limited partners buy units — rather than shares — that trade on stock exchanges.

Three main factors contribute to MLPs’ high yields. First, MLPs are

Playing the yield fi eld

TRUSTS AND PARTNERSHIPS ––– Estimated –––Company (Price; Ticker) Dividend Yield Industry

Royalty TrustsBP Prudhoe Bay Royalty ($80; BPT) $9.25 11.6% Oil & Gas ExplorationCross Timbers Royalty ($29; CRT) 2.29 7.8 Oil & Gas ExplorationEnduro Royalty ($12; NDRO) 1.61 13.3 Oil & Gas ExplorationHugoton Royalty ($8; HGT) 0.86 11.5 Oil & Gas ExplorationSabine Royalty ($51; SBR) 4.35 8.6 Oil & Gas Exploration

Master Limited Partnerships Alliance Holdings ($59; AHGP) 3.23 5.5 Coal & Consum. FuelsAlliance Resource ($77; ARLP) 4.70 6.1 Coal & Consum. FuelsAmerigas Partners ($45; APU) 3.36 7.5 Gas UtilitiesBlackstone Group ($32; BX) 1.18 3.7 Asset ManagementBoardwalk Pipeline ($26; BWP) 2.13 8.3 Oil & Gas StorageBuckeye Partners ($71; BPL) 4.30 6.1 Oil & Gas Storage

Calumet Specialty Prods. ($26; CLMT) 2.74 10.5 Oil & Gas RefiningEl Paso Pipeline Partners ($36; EPB) 2.60 7.2 Oil & Gas StorageKinder Morgan Energy ($81; KMP) 5.40 6.7 Oil & Gas StorageKKR ($24; KKR) 1.62 6.7 Asset ManagementPlains All Amer Pipeline ($52; PAA) 2.46 4.8 Oil & Gas StorageSunoco Logistics Partners ($75; SXL) 2.52 3.3 Oil & Gas Storage

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Amstock — www.amstock.comAcadia Realty ($250) ................. 800-278-4353 ......AKRAir Products ($500) ................... 877-322-4941 ......APDAMCOL International ($250) ....... 888-444-0058 ..... ACOAmerican Water Works ($100) .... 888-556-0423 .....AWKAMETEK ($250) ......................... 877-854-0864 ..... AMEAnworth Mtg. Asset ($1,000) ..... 877-248-6410 .... ANHArrow Financial ($300)............... 800-937-5449 .. AROWAtmos Energy ($1,250) .............. 800-543-3038 ......ATOBadger Meter ($100) ................. 877-248-6415 ...... BMIBob Evans Farms ($250) ............ 800-937-5449 ....BOBEBrookline Bancorp ($250) .......... 800-278-4353 ....BRKLBuckeye Partners ($250) ........... 877-724-6457 ...... BPLCalifornia Water Service ($250).. 888-888-0316 .....CWTCardinal Financial ($250) ........... 877-814-9740 ....CFNLCarpenter Technology ($250) ..... 800-278-4353 ......CRSCarriage Services ($250) ........... 877-611-8040 ......CSVChase Corp. ($250) ................... 800-278-4353 ......CCFColumbus McKinnon ($250) ...... 800-278-4353 .. CMCOCommunity Bank Sys. ($250) .... 800-278-4353 ..... CBUCracker Barrel ($250) ................. 800-278-4353 ....CBRLDime Community ($300) ........... 800-278-4353 .. DCOMDuke Realty ($250) .................... 800-278-4353 ......DREDunkin’ Brands ($250) ............... 800-937-5449 ...DNKNEastern ($250) ........................... 800-278-4353 ..... EMLEastman Chemical ($250) .......... 877-322-4908 .....EMNEducation Realty ($300) ............. 866-659-2645 ......EDREquifax ($500) ........................... 866-665-2279 ...... EFXFBL Financial ($250) ................. 866-892-5627 ...... FFGFederal Realty ($250)................. 877-611-8039 .......FRTFifth Third Bancorp ($250) ......... 888-294-8285 ..... FITBFirst Niagara Fin’l ($250) ........... 877-785-9670 ....FNFGHorace Mann Educators ($250) .. 877-295-6910 .... HMNInfinity Property ($250) .............. 866-624-4112 .....IPCCIntegrys Energy ($100) ............... 800-236-1551 ...... TEGIntersil ($250) ............................ 877-208-9537 ..... ISILJeffersonville Bancorp ($250) .... 800-278-4353 .... JFBCL Brands ($200) ......................... 866-875-7975 ......LTDMicrosoft ($250) ....................... 800-285-7772 ... MSFTNational Retail Prop. ($100) ....... 800-278-4353 ..... NNNNorfolk Southern ($250) ............ 877-864-4750 ..... NSCNorthwest Natural Gas ($250) .... 888-777-0321 .... NWNPaychex ($250) ......................... 877-814-9688 ....PAYXPeabody Energy ($500) .............. 866-621-2789 ......BTUPG&E ($250) ............................. 888-489-4689 ..... PCGResource Capital ($100) ............ 866-709-7699 ......RSOSempra Energy ($500) ............... 877-773-6772 ......SRESkyworks Solutions ($1,000) ..... 877-366-6437 ...SWKSSpartan Motors ($250) ............... 888-888-0145 ....SPARState Street ($250) ..................... 800-278-4353 ...... STTSynovus Financial ($250) .......... 888-777-0322 ......SNVTeleflex ($250) ........................... 800-278-4353 .......TFXTompkins Financial ($100) ......... 877-573-4008 ..... TMPTotal System Services ($250) ..... 877-833-6707 ...... TSSTrustmark ($250) ....................... 877-476-4393 ... TRMKUIL Holdings ($250) .................. 800-278-4353 ....... UILWorld Wrestling ($250) .............. 888-556-0424 ...WWEYork Water ($500) ...................... 877-739-9990 ...YORW

Yum! Brands ($250) ................... 888-439-4986 .....YUMZep ($250) ................................ 877-842-1551 ...... ZEP

Broadridge — stockplans.broadridge.comAvery Dennison ($500) .............. 877-498-8861 ......AVYChubb ($200) ............................ 866-232-3039 ........CBCSX ($500) ............................... 800-521-5571 ......CSXCurtiss-Wright ($250) ................ 800-278-4353 .......CWDisney (Walt) ($250) ................. 855-553-4763 .......DISKMG Chemicals ($200) ............. 877-830-4936 .....KMGSpectra Energy ($250) ............... 855-277-3287 ........ SE

Computershare — www.computershare.comAbbVie ($250) ........................... 877-881-5970 ....ABBVAcuity Brands ($500) ................. 800-432-0140 ....... AYIAetna ($500) ............................. 800-446-2617 ...... AETAgilent ($500) ........................... 877-309-9856 .......... AAlaska Commun. ($250) ............ 877-870-2426 ....ALSKAllegheny Technologies ($250) .. 800-406-4850 ....... ATIAltria ($500) .............................. 800-442-0077 .......MOAmerican Capital ($250) ............ 800-733-5001 ...AGNCAmerican Electric Pwr. ($250) .... 800-328-6955 ......AEPAmerican Express ($1,000) ........ 800-463-5911 ......AXPAmerican States Water ($500) .... 888-816-6998 .....AWRAmeriprise Financial ($1,000) ... 866-337-4999 ... AMPAndersons ($250) ..................... 312-360-5260 . ANDEAon ($250) ................................ 800-446-2617 ..... AONApplied Industrial Tech.($250) ... 800-988-5291 ....... AITAqua America ($500) ................. 800-205-8314 .... WTRArthur J. Gallagher ($250).......... 312-360-5386 ......AJGAT&T ($500).............................. 800-351-7221 .......... TAvis Budget Group ($250) .......... 800-522-6645 ......CARAvista ($250) ............................. 800-642-7365 ......AVAAvon Products ($500) ................ 800-446-2617 ......AVPBaker Hughes ($500) ................. 888-216-8057 .......BHIBank of America ($1,000) .......... 800-642-9855 ......BACBank of NY Mellon ($1,000) ....... 888-643-4269 ........BKBank of SC ($250) ..................... 800-568-3476 ... BKSCBanner ($250) ........................... 800-697-8924 ... BANRBard (C.R.) ($250) ..................... 800-446-2617 ......BCRBarnes Group ($250) ................. 800-801-9519 ..........BBB&T ($250) ............................. 800-213-4314 ......BBTBecton, Dickinson ($250) .......... 877-498-8861 ......BDXBest Buy ($500) ......................... 877-498-8861 .....BBYBioMed Realty ($100) ................ 800-524-4458 .....BMRBlyth Inc. ($250) ........................ 800-446-2617 ......BTHBorgWarner ($500) .................... 800-851-4229 .....BWABoston Beer ($500).................... 888-877-2890 .....SAMBoston Properties ($250) ........... 888-485-2389 ......BXPBrown Shoe ($250) .................... 866-865-6319 .....BWSBrunswick ($500) ...................... 800-546-9420 ........BCBuckle ($500) ............................ 800-884-4225 ......BKECalamos Asset Mgt. ($200) ....... 800-432-8224 ...CLMSCampbell Soup ($500) .............. 800-780-3203 ......CPBCash America ($250) ................. 800-542-7530 ..... CSHCass Info. Systems ($250) ......... 866-323-8170 ... CASSCaterpillar ($250) ...................... 866-203-6622 ......CATChevron ($250) ......................... 800-368-8357 ......CVXChurch & Dwight ($250) ............ 866-299-4219 ..... CHD

Stock (min. initial investment) Phone Symbol

U.S. fi rms which permit initial purchases directlyStock (min. initial investment) Phone Symbol

Directory of no-load stock programs

1st Quarter 2014 49

For many investors, holding bonds makes sense. But with high-quality bonds yielding so little today, even conservative income investors should give stocks a look.

While stocks are more volatile than bonds, they tend to outperform over the long haul. Since 1926, large-cap stocks have delivered an annualized return (including dividends) of nearly 10%, versus less than 6% for intermediate-term government bonds.

Bonds have notched solid returns over the last 10 years and continue to receive mutual-fund infl ows, but recent returns could help stock funds win back some fans. In addition, dividend-paying stocks tend to deliver less-volatile returns than the average stock. The table lists 10 attractive income funds from nine different categories, all of which hold more in equities than in bonds. iShares S&P U.S. Preferred Stock Index ($37; PFF), with a current yield of 6.6%, is a decent pick. Preferred stocks often behave more like bonds than stocks because they are sensitive to an issuer’s creditworthiness. The fund has an expense ratio of 0.48%. Vanguard Wellington ($38; VWELX) is a longtime Forecasts favorite and a holding in our recommended Growth and Conservative portfolios. The fund, which holds roughly 60% stocks and 40% bonds, yields 2.4%. Its 10-year annualized return of nearly 8.1% ranks among the top 5% of its peer group. The expense ratio is 0.25%.

Alternatives to bond funds

SELECT INCOME FUNDS Estimated ExpenseFund (Price; Ticker) Yield RatioMutual FundsFidelity Telecom and Utilities ($22; FIUIX) 1.9% 0.83% UtilitiesVanguard Equity income ($30; VEIPX) 2.4 0.30 Large-cap valueVanguard High Dividend Yield ($25; VHDYX) 2.7 0.20 Large-cap valueVanguard REIT ($22; VGSIX) 4.2 0.24 Real estateVanguard Wellington ($38; VWELX) 2.4 0.25 Balanced stock biasExchange-traded funds ALPS Alerian MLP ($18; AMLP) 6.0 0.85 Limited ptnrshp.iShares Select Dividend ($71; DVY) 3.1 0.40 Midcap valueiShares S&P U.S. Preferred Stock ($37; PFF) 6.6 0.48 Preferred stockSPDR S&P Dividend ($73; SDY) 2.3 0.35 Large-cap valueWisdomTree SmallCap Dividend ($68; DES) 2.4 0.38 Small-cap value

50 1st Quarter 2014

3M (MMM) $140 $3.42 2.4% Mar, Jun, Sep, Dec 5% IndustrialsAbbott Laboratories (ABT) 38 0.88 2.3 Feb, May, Aug, Nov -7 Health CareAbbVie (ABBV) 53 1.60 3.0 Feb, May, Aug, Nov NA Health CareAccenture (ACN) 82 1.86 2.3 Semi-Annual 28 TechnologyAce (ACE) 104 2.52 2.4 Jan, Apr, Jul, Oct 12 FinancialsActavis (ACT) 168 0.00 0.0 none NA Health CareAdobe Systems. (ADBE) 60 0.00 0.0 none NA TechnologyADT (ADT) 40 0.50 1.2 Feb, May, Aug, Nov NA IndustrialsAES (AES) 15 0.20 1.4 Feb, May, Aug, Nov NA UtilitiesAetna (AET) 69 0.90 1.3 Jan, Apr, Jul, Oct 81 Health CareAFLAC (AFL) 67 1.48 2.2 Mar, Jun, Sep, Dec 9 FinancialsAgilent Technologies (A) 57 0.53 0.9 Jan, Apr, Jul, Oct NA TechnologyAGL Resources (GAS) 47 1.88 4.0 Mar, Jun, Sep, Dec 2 UtilitiesAir Products & Chem. (APD) 112 2.84 2.5 Feb, May, Aug, Nov 10 MaterialsAirgas (ARG) 112 1.92 1.7 Mar, Jun, Sep, Dec 31 MaterialsAkamai Technologies (AKAM) 47 0.00 0.0 none NA TechnologyAlcoa (AA) 11 0.12 1.1 Feb, May, Aug, Nov -29 MaterialsAlexion Pharmaceut. (ALXN) 133 0.00 0.0 none NA Health CareAllegheny Technologies (ATI) 36 0.72 2.0 Mar, Jun, Sep, Dec 0 MaterialsAllegion (ALLE) 44 0.00 0.0 none NA IndustrialsAllergan (AGN) 111 0.20 0.2 Mar, Jun, Sep, Dec 0 Health CareAlliance Data Systems (ADS) 263 0.00 0.0 none NA TechnologyAllstate (ALL) 55 1.00 1.8 Jan, Apr, Jul, Oct -10 FinancialsAltera (ALTR) 33 0.60 1.8 Mar, Jun, Sep, Dec 20 TechnologyAltria Group (MO) 38 1.92 5.0 Jan, Apr, Jul, Oct -7 Cons. StaplesAmazon (AMZN) 399 0.00 0.0 none NA Cons. Discret.Ameren (AEE) 36 1.60 4.4 Mar, Jun, Sep, Dec -9 UtilitiesAmerican Elec. Power (AEP) 47 2.00 4.3 Mar, Jun, Sep, Dec 3 UtilitiesAmerican Express (AXP) 91 0.92 1.0 Feb, May, Aug, Nov 4 FinancialsAmerican Int’l Group (AIG) 51 0.40 0.8 Mar, Jun, Sep, Dec -64 FinancialsAmerican Tower (AMT) 80 1.16 1.5 Jan, Apr, Jul, Oct NA TelecomAmeriprise (AMP) 115 2.08 1.8 Feb, May, Aug, Nov 26 FinancialsAmerisourceBergen (ABC) 70 0.94 1.3 Mar, Jun, Sep, Dec 41 Health CareAmetek (AME) 53 0.24 0.5 Mar, Jun, Sep, Dec 18 IndustrialsAmgen (AMGN) 114 2.44 2.1 Mar, Jun, Sep, Dec NA Health CareAmphenol (APH) 89 0.80 0.9 Jan, Apr, Jul, Oct 48 TechnologyAnadarko Petroleum (APC) 79 0.72 0.9 Mar, Jun, Sep, Dec 5 EnergyAnalog Devices (ADI) 51 1.36 2.7 Mar, Jun, Sep, Dec 12 TechnologyAon (AON) 84 0.70 0.8 Feb, May, Aug, Nov 2 FinancialsApache (APA) 86 0.80 0.9 Feb, May, Aug, Nov 1 EnergyApartment Invt. &Mgt. (AIV) 26 0.96 3.7 Feb, May, Aug, Nov -33 FinancialsApple Computer (AAPL) 561 12.20 2.2 Feb, May, Aug, Nov NA TechnologyApplied Materials (AMAT) 18 0.40 2.3 Mar, Jun, Sep, Dec 10 TechnologyArcher-Daniels-Mid. (ADM) 43 0.96 2.2 Mar, Jun, Sep, Dec 9 Cons. Staples

Dividend 5-Year Recent Payment DividendName (Symbol) Price Div. Yield Dates Growth Sector

Directory of dividend information for S&P 500 stocksThe following is a directory of dividend information for all the stocks

that comprise the S&P 500 index. Each listing includes the name of the company, the stock symbol, current price, dividend, dividend yield, dividend payment schedule, dividend growth, and sector.

Please note that not all of the stocks in the S&P 500 index pay divi-dends. Also note that companies may have altered dividend payments since this directory was published. Changes to the index are in bold.