Meet the Dividend Achievers

Created by Mergent and now overseen by Indxis, several indexes track
companies that qualify as "Dividend Achievers" -- an elite group of
roughly 300 businesses that have increased their dividends annually
over the past decade, and that meet certain liquidity requirements.

These achievers are worth following because dividends can really
pack a punch for your portfolio. According to an Ibbotson study,
reinvested dividends made up 40% of total stock returns from 1926 to
2006.  

Dividend aficionados like me now have an easy way to buy into the
Dividend Achievers index, thanks to exchange-traded funds (ETFs) such
as the PowerShares Dividend Achievers ETF (PFM), which recently sported a 2.8% dividend yield.

But that's not exciting enough for me. To earn a spot on the list, a
company must simply increase its dividend 10 years in a row. That's a
decent enough accomplishment, since troubled companies often reduce or
eliminate their dividends instead, but it's not all that impressive.
After all, a company could have grudgingly increased its payout by a
penny or two per year, and still made the list.

Stronger measures
The folks at Indxis
headquarters may have been thinking along the same lines, because they
now offer several subsets of the big list.

The Dividend Achievers 50 Index, for example, tracks the 50
highest-yielding stocks on the list -- a more tantalizing option for
me, given its higher dividend rates. Healthy companies with high
dividend yields tend to have drawn the market's scorn for some reason
-- if the dividend stays constant, and the stock price falls, the
dividend yield rises.

The High Growth Rate Dividend Achievers index presents another
intriguing option. This index filters the list to highlight the 100
stocks with the fastest-growing dividends, giving you an easy way to
invest in some of the market's most active and aggressive dividend
payers.

Some examples of stocks within the High Growth Rate index include:

Source: Indxis, Yahoo! Finance.

Caveat emptor, investors
Before you go
looking for ETFs that track these indexes, though, be aware that
PowerShares recently shuttered the ETF that tracked the High Growth
Rate Dividend Achievers. Apparently, lack of investor interest led to
asset levels that couldn't sustain the fund's operations. Nevertheless,
you can buy individual shares of the companies within the index, or
stick with ETFs based on the other two indexes.

In addition, even with these screens, you'll find stocks that may
not meet your own requirements. For instance, despite its various
attractions, Wal-Mart is certainly not universally loved. Among our Motley Fool CAPS
community, more than 100 All-Star members are bearish on the company,
pointing to a potential loss of revenue when the economy recovers and
consumers return to more expensive shopping options. Still, as long as
you buy an ETF or build your own diversified portfolio, one bad
performer won't torpedo your returns. (That's the beauty of
diversification.)

Indexes are a good place to start, but a little research can help
you strengthen your investments' focus. To maximize your dividend
power, seek attractive companies with sizable, regularly growing
dividends.

For more on income investing, read about:

• Here's some frightening news for dividend investors.
• It's time to double down on dividend payers.
• © 2009 UCLICK L.L.C.