5 Dynamic Dividend Stocks

Quiz time, sports fans: What did the New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s have in common? (And exactly how can this help you with your portfolio?)

It wasn't just that they had some of the best individual players of the time -- Yogi Berra, Michael Jordan, and Emmitt Smith, respectively -- although that certainly helped. And it wasn't just that they were able to bring home world championship trophies on a regular basis. It was simply that their organizations and performances were consistently excellent.

Consistent excellence is rare anywhere, but imagine seeing it in your portfolio. Impossible? No way! Because that's what carefully chosen dividend-paying stocks can offer.

Build the next investing dynasty
Finding these long-haul outperformers can help you build your fortune, as studies from investing gurus such as Jeremy Siegel have shown time and time again. Finding them for you is precisely what we do at our Motley Fool Income Investor service.

California Water Services (NYSE: CWT  ) , for example, is up 62% since October 2003, and it is currently rewarding investors with a 3.0% yield. Then there's Southern Company (NYSE: SO  ) , which has returned 39% since December 2003 on top of a current 4.5% yield. And while both stocks happen to be Income Investor recommendations, you don't need to be a subscriber to get these great gains.

Identify new talent
With that last thought in mind, I'd like to introduce you to our new community intelligence database, Motley Fool CAPS. There, savvy investors help one another identify stocks that can create consistent and substantial growth for any type of investor. That means whether you're a Buffett-esque value investor or a chart-watching technical trader, you are welcome to strut your stuff. And, just as in professional sports, the cream inevitably rises to (and stays at) the top.

So what are the best dividend-paying stocks around, according to CAPS? Here are a few dividend picks with five-star ratings:

Company

Yield

Norfolk Southern (NYSE:NSC)

2.1%

Patterson-UTI Energy (NASDAQ:PTEN)

2.2%

Tefron (NYSE:TFR)

11.0%

Greif  (NYSE:GEF)

2.1%

Aspen Insurance Holdings (NYSE:AHL)

2.6%

Sources: Capital IQ, Yahoo! Finance, and CAPS as of Aug. 16.

Stake your claim
I encourage you to join CAPS to learn more about why investors are so bullish on these companies, and perhaps to add your own thoughts to the system. I'll get you started with some thoughts about one company here that may be worth checking out: Aspen Insurance Holdings.

If you haven't noticed yet, Mr. Market has been in a really bad mood lately, largely thanks to turmoil in the credit markets. The insurance industry in particular has taken a hit as investors reevaluate what they think of the massive portfolios of fixed-income securities that insurance companies carry. That many insurance companies have also mixed in some exposure to hedge funds doesn't help the situation, either.

But this isn't stopping many insurance companies, including Aspen, from producing solid operating results in the interim. For its quarter ended in June, which it released in late July, Aspen delivered earnings per share of $1.14, edging out Wall Street's expectation of $1.11. It also reported revenue up 13% from the prior year and an annualized return on equity of more than 20%.

Despite these results, Aspen has dropped from more than $28 in late July to just more than $23 currently. And I might note that the current price is just less than the company's book value per share.

Jack21222, a CAPS All-Star, has noticed Aspen's current situation and picked it to outperform. He shares:

A dividend-paying, cash-generating machine estimated to grow at 10% per year should not be trading at a forward P/E of 6 or a price to book ratio of 0.84. Shorts have piled on recently, and they'll need to cover eventually. Looks good to me.

And looping back around to conclude my (very) extended sports metaphor, allow me to suggest that dividend stocks will help you turn your portfolio into the dependable New York Yankees, rather than the flash-in-the-pan Florida Marlins. And if you hate the Yankees, it's probably because they're so darn good, so darn often.

More CAPS coverage:

A 30-day free trial ofMotley Fool Income Investor can point you toward more great companies -- and more great dividend yields.

Yankees fan and Fool contributor Matt Koppenheffer hopes the Yanks can continue (regain?) their legendary excellence, and has his fingers crossed that the Cowboys will never get back to the top again. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is a true investing dynasty.


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