In 2012, the dividend-paying club will evolve to kick out the old, and bring in the new. Investors hunting for yield should adjust accordingly, David Katz, Matrix Asset Advisors' chief investment officer told CNBC Thursday.
"We think dividends will be a more and more important part of a company's action, because the market is really paying attention. Higher dividend stocks are doing a lot better," he said.
Utilities, once the vanguard of dividend payers, are being pushed aside to make room for others offering higher yields.
"Utilities are paying 4 percent to 4.5 percent, and that is good relative to U.S. Treasurys," Katz noted. "But that's lower than what they've paid historically, and their earnings growth looks anemic."
Katz prefers companies growing into the higher single digits. His top picks, increasing dividends right along with earnings are: Heinz , Johnson &Johnson , Royal Dutch Shell , and Vodafone .
"In the Vodafone case, they are getting extra return from the Verizon Wireless investment and they are going to go up much quicker than the market," he said. Vodafone has outperformed the Standard & Poor's 500 for the year to date, with its shares up around 5 percent.
Technology companies are also on Katz's hot list. Cisco Microsoft, and Intel are the newest members of the high-yield ranks, he said, adding, "Intel pays a very nice yield, and has been a lot less volatile than a lot of technology stocks because of that yield."
Year to date, the S&P 500 is essentially flat, whereas Intel's share priceis up close to 20 percent.
"As they get rewarded for it, companies will pay a higher and higher yield," Katz concluded.
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Disclosures:
Matrix Asset Advisors include the aforementioned stocks in its "High Dividend" and "Core Value" portfolios. David Katz owns a portion of the "Core Value" portfolio, which holds Vodafone, Cisco and Microsoft.