NEW YORK (AP)—In the hunt for dividends, biggest doesn’t always mean best.
Big, blue chip stocks are often the first stop for many dividend investors. Companies like Exxon Mobil or Procter & Gamble have long histories of paying dividends and higher yields than the market’s average. But smaller companies pay dividends too, and some mutual-fund managers count them among the best opportunities to find dividend growth.
That’s why Don Taylor, who has managed the Franklin Rising Dividends fund since 1996, prefers companies a tier or two below the dividend behemoths. He considers the sweet spot to be companies valued between $20 billion and $50 billion. Exxon Mobil, in comparison, is worth $422 billion, and Procter & Gamble, more than $219 billion. The average market value of companies in the Standard & Poor’s 500 index is $36 billion.
One of the biggest investments in Taylor’s fund is Roper Industries, an industrial company worth $14 billion. At first glance, it may not look like a great dividend stock with a yield of 0.6 percent. Taylor has been comfortable with the low yield because Roper has been using a lot of its cash to buy competitors to accelerate its growth. Those acquisitions helped Roper’s annual revenue nearly quintuple over a decade and top $3 billion last year.