The exceptional financial health of American corporations is manifesting itself in a dividend payment renaissance. Currently 421 members of the S&P 500 Index are paying dividends which is just shy of the 1998 level of 423. In the late 1990s and early 2000s, the prevailing trend was for corporations to hang on to their cash to buy back shares or reinvest in their business growth plan.

After the 2008-09 financial crisis the value of dividend payments had been recognized by investors and corporations are paying attention. Not only are more companies paying dividends, but more are also increasing their dividend payments at above average rates.

In the first quarter of 2014, 146 members of the S&P Index announced dividend increases compared to 94 in the fourth quarter of 2013. The average increase in dividends in the first quarter alone was 4 percent which compares favorably to the long-term annualized rate of increase for the S&P companies of 6 to 7 percent.

Over time, the fact that dividends tend to increase is an important component of the total return offered by holding a portfolio of quality companies. For example, from 2000 to 2013 the price appreciation of the S&P 500 was about 33 percent. That periods return was retarded by two major bear markets in 2000-02 and 2008-09.

However, during that period the dividend income from each share of the S&P Index grew from $16.29 to $36.53, a 124 percent increase! We cannot buy a share of the S&P 500 Index, but you could own shares of an index fund mimicking the index and obtain essentially the same result. Another strategy would be to focus on investing in companies which raise their dividends at higher rates than the long-term average of 6 to 7 percent.

Microsoft, IBM, Colgate Palmolive and Walmart are just a few examples of companies which have delivered dividend increases at more than a 10 percent average annual rate over the last five years. Some of these, as well as other firms, have been providing rates of increase well into the teens, which would double the level of income in 5 to 7 years if the trend continues.

With the current market uptrend being well into it’s sixth year, we would not put a lot of your cash into the market at the present time. Rather, I suggest a methodical approach to building a diversified portfolio of rising dividend stocks. Be more aggressive with purchases after market corrections have occurred or after individual companies have experience price declines from recent highs.

Tom Breiter is president of Breiter Capital Management, Inc., an Anna Maria based investment advisor. He can be reached at 778-1900. Some of the investment concepts highlighted in this column may carry the risk of loss of principal, and investors should determine appropriateness for their personal situation before investing. Visit www.breitercapital.com.