A new report from Ned Davis Research shows that companies that consistently raise their dividends provide the strongest returns for investors over the long run.

But I'm still not a fan of dividends: They're incredibly inefficient when it comes to tax-season, making share buybacks far superior as a means of returning value to shareholders of an undervalued stock -- and if the stock isn't undervalued, why own it in the first place? It's my belief that shareholders in a company should always prefer buybacks to dividends -- if you'd rather pay a big tax to receive cash instead of receiving a larger stake in the company, why do you own the stock in first place?

The Wall Street Journal reports on the study: "Since 1972, members of the Standard and Poor's 500-stock index that consistently increased their payouts, or started making them, rewarded shareholders with a yearly average 10.4% total return (stock-price appreciation plus dividends). Those that didn't boost dividends clocked 8.2%. Most of the difference came from superior stock performance." (emphasis added)

Think about it: Companies that are able to boost their dividends consistently are also, generally (A) increasing their profits and (B) not blowing their cash flow on ill-advised acquisitions. Both of these would seem to be, I believe, much more strongly correlated with outstanding returns than returning cash to shareholders with taxes.