Being able to generate consistently growing dividend payments over a long period is one sign of a high-quality business. Companies which can achieve this are typically good candidates to consider as core long-term holdings.
Here are two funds that are focused on investing in companies with growing dividends:
BKI Investments Co Ltd (ASX: BKI)
BKI is a listed investment company which has been trading since 2003. It holds a focused portfolio of 50-60 large cap stocks, with the top 25 positions currently representing over 80% of the portfolio.
A focus on companies with growing dividends means these flow through to BKI's investors in a stream which has increased steadily over the last decade.
Source: BKI monthly report, April 2016
As you can see, although BKI's shares fell nearly 50% during the financial crisis in 2008, investors focused on their dividend income alone in that period would have hardly noticed.
Including capital gains and franking credits, BKI has returned 10.4% pa to investors over the last 10 years.
For any long-term investment, it is important to keep costs to a minimum, so it is good to see that BKI has a management expense ratio of just 0.17%. Another good sign is that the board and management of BKI are all shareholders in the fund.
BKI is currently trading with a fully franked dividend yield of 4.6%.
SPDR S&P Global Dividend ETF (ASX: WDIV)
For international exposure to dividend growers, consider the SPDR S&P Global Dividend ETF which tracks the S&P Global Dividend Aristocrats Index. This holds around 100 companies which have demonstrated stable or growing dividends for at least 10 years.
Current investments include toy company, Mattel Inc., US telecommunications giants AT&T Inc. and Verizon Communications Inc., British pharmaceutical giant, GlaxoSmithKline plc, US energy company, Chevron Corporation, and Japanese imaging company Canon, Inc..
The fund's largest allocations are currently to stocks in the US (22%), Canada (19.5%), the UK (10.4%), South Africa (8.6%) and Hong Kong (4.99%).
It also holds four Australian stocks representing around 4% of the fund, these are Woolworths Limited (ASX: WOW), APA Group (ASX: APA), Challenger Ltd (ASX: CGF) and Sonic Healthcare Limited (ASX: SHL). However, I assume Woolworths will be dropped from the portfolio given its recent troubles and dividend cuts.
The ETF charges 0.5% for management expenses and currently has a dividend yield of 4.97%.
While these funds are likely to deliver solid long-term performance, a portfolio focused on only the best dividend stocks has a good chance of doing even better.
