Dear Mr. Berko:

I have $34,000 to invest. I want to invest in a portfolio of very conservative stocks that pay good dividends. I am in the armed services and I may be in Iraq, Europe, Iceland, Africa or the Mideast at any time for extended periods of time. Therefore, I don’t have the ability to look after my investments, nor do I have the skills to choose the right stocks.

I have a time horizon of 10 or 11 years. Please select some good stocks that I can hold in my account and that will hopefully increase their dividends and their stock value. I do not want any mutual funds that a broker up here suggested.

E.R., Fort Walton Beach, Fla.

Dear E.R.:

I like stocks that increase their dividends every year. I feel that a long history of annual dividend growth may often be a good measure of a company’s success. If you’re very conservative, it makes sense to use the power of dividend growth to help create principal growth. A portfolio built on a foundation of solid dividend-growth issues may also have an excellent support cushion in a down market.

So here’s my list of 11 issues for your 10-year plan. Each has a current yield of 3 percent or better and each (between 1993 and 2003) has enjoyed an average annual dividend increase of at least 10 percent.

AmSouth Bancorp. (ASO-$24.75) pays 96 cents and has a yield of 3.9 percent. ASO operates a retail and commercial bank and trust business in the South. The dividend has enjoyed an average annual increase of more than 11 percent since 1993 and the stock price has tripled in the past decade.

BancorpSouth Inc. (BXS-$22.18) has a dividend of 72 cents and a yield of 3.3 percent. BXS is a holding company with more than 250 branches in the South. The average annual dividend growth exceeds 11 percent and the stock price has more than tripled since 1993.

Colonial Bancgroup Inc. (CNB-$17.49) conducts a general commercial banking business in the South and West via 270 branches. The dividend of 58 cents yields 3.3 percent. In the last 10 years, the average annual dividend growth has exceeded 12 percent and the share price has more than tripled.

First Commonwealth Financial Corp. (FCF-$14.76) pays a dividend 64 cents, producing a yield of 4.3 percent. This 90-branch bank serves 18 counties in central and western Pennsylvania. The dividend has enjoyed a 10-year average annual growth of more than 11 percent. During the past decade, the shares have more than tripled.

Hudson United Bancorp (HU-$37.97) conducts a general banking business in New York, New Jersey, Pennsylvania and Connecticut. The $1.32 dividend yields 3.5 percent and has enjoyed a 10-year average annual increase of more than 18 percent. The stock price has grown more than fourfold in the past decade.

BB&T Corp. (BBT-$37.40) pays $1.28, yields 3.4 percent and its dividend has had an average annual increase of better than 16 percent over the past decade. BB&T conducts its banking business through 1,100 offices in the South and Midwest, and its stock price has grown over fourfold since 1993.

Regions Financial Corp. (RF-$36.95) pays a $1.32 dividend that yields 3.6 percent and has enjoyed an 11 percent average annual increase in the past 10 years. RF conducts a brokerage, insurance, mortgage, factoring and specialty finance business primarily in the South, and on Jan. 23 announced plans to merge with Union Planters Corp. The share price has nearly tripled since 1993.

Wells Fargo & Co. (WFC-$56.95) pays a $1.80 dividend that yields 3.2 percent and has had an average annual increase of better than 15 percent since 1993. This huge diversified financial services company conducts its business via 5,600 offices throughout North America and the world. The stock price has grown more than fourfold in the past decade.

Bank of America Corp.’s (BAC-$81.51) $3.20 dividend yields 3.9 percent and its 10-year average annual increase exceeds 12 percent. This huge financial services company conducts its operations via 4,200 offices throughout North America, and its share price has grown more than fourfold during the last decade.

Washington Mutual Inc.’s (WM-$44.93) $1.68 dividend yields 3.7 percent and has an average annual increase of more than 22 percent, during the last decade. This national financial services company conducts its business throughout most of the United States and its share price has grown more than fivefold in the past 10 years.

Merck & Co. Inc.’s (MRK-$48.50) $1.48 dividend yields 3 percent and has an average annual increase of more than 12 percent since 1993. MRK is a huge global pharmaceutical company whose share price has better than tripled in the past decade.

I recommend you purchase $3,000 of each of these 11 issues and reinvest the dividends each quarter. If you follow this recommendation, it is conceivable that the combined dividend income from your $34,000 investment may grow from approximately $1,056 today to about $4,800 by 2014.

Many of my clients and I own positions in many of these issues.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.