Constructing A Successful Long Term Dividend Growth Portfolio: Step 2 - Installing The Utilities

Overview In Step 1 of this series, I used the Dividend Aristocrats list as a starting point in building a foundation for a long term dividend growth portfolio. For Step 2, I am going to use Dave Fish's Dividend Champions list. Actually, I'm going to use the Dividend Champions, Dividend Contenders, and Dividend Challengers lists. Dividend Champions are similar to Dividend Aristocrats in that they have seen 25+ years of consecutive dividend increases without the requirement of being a S&P 500 stock. Dividend Contenders have seen 10+ years of dividend increases and Dividend Challengers have seen 5+ years. The stocks I'm going to be focusing on within these three lists should be obvious based on the title of the article. I am going to be looking at utility stocks.
Utility stocks are often thought of as defensive investments, but they can offer significant returns. Looking at the charts below, you can see that the Dow Jones Utility Average (which tracks the performance of 15 prominent utility companies) has performed slightly better this year and looking at the past three years has performed comparable to the market in general.


And while utilities are considered defensive investments, no investment is fool proof and this can be seen by past poor performances of the Dow Jones Utility Average. One of the worst of these performances was between 1965 and 1974 when the average went from a 153.32 level to a 57.93 level. It currently sits at a 741.56... Read more