Quiz time, sports fans: What do 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.
Invesco, for example, has returned 190% since October 2004, and it currently is rewarding investors with a 1.1% yield. Then there's Enterprise Products Partners (NYSE: EPD ) , which has returned 74% since May 2004 and now sports a 6.1% yield. And while these stocks happen to be Income Investor recommendations, you don't need to be a subscriber to find winning stocks like these.
Identify new talent
With that last thought in mind, I'd like to introduce you to our 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 high CAPS ratings:
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Company
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Yield
|
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Terra Nitrogen (NYSE:TNH)
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5.8%
|
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New Frontier Media (:NOOF)
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8.7%
|
|
Otter Tail (NASDAQ:OTTR)
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3.2%
|
|
Fomento Economico Mexicano (NYSE:FMX)
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1.8%
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Telefonos de Mexico (NYSE:TMX)
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2.2%
|
Source: Capital IQ, Yahoo! Finance, and CAPS, as of Dec. 28, 2007.
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 ideas to the system. I'll get you started with thoughts about one company that may be worth checking out: Fomento Economico Mexicano.
Though it may carry the lowest dividend yield of our group, Fomento Economico -- also known as FEMSA -- has the kind of opportunity that can bring that sweet one-two combo of income and capital appreciation. FEMSA is a soda and beer bottler that sells the ever-popular Coca-Cola along with Fanta, Sprite, and, on the alcoholic front, Dos Equis and Tecate. The company also operates 4,800 Oxxo convenience stores.
The stock currently trades at 18 times 2007 earnings estimates, and analysts expect the company will be able to grow earnings nearly 20% per year over the next five years. Should FEMSA hit that target, five years from now, today's stock price will look like a heck of a bargain.
CAPS players have been all over the opportunity -- of 273 total ratings for FEMSA, 271 are outperforms. One of CAPS' top players, the Fool's own TMFMmbop, recently joined the bull party and said that this is a "reasonable price for what should be a long-term demographic play."
And if the strong vote from CAPS players isn't enough for you, then maybe a man named Bill can convince you. Earlier this month Microsoft (Nasdaq: MSFT ) billionaire head honcho Bill Gates took a $392 million stake in FEMSA.
You can check out who has been bullish on FEMSA, as well as chime in with your own thoughts, by heading over to CAPS. You might want to check out a few of the other top-rated dividend payers while you're there.
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.
For every post you make to CAPS or any Foolish discussion board in the month of December, The Motley Fool will donate $0.02 to charity. So give us your 2 cents and we'll pay it forward!
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