The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s had one crucial element in common: consistent excellence in their organizations and performance. That's a rare accomplishment, but if you think it could never occur in your portfolio, think again. Carefully chosen dividend-paying stocks could be your key to superstar returns.
Build the next investing dynasty
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 is our Motley Fool Income Investor service's mission.
Annaly Capital Management (NYSE: NLY ) , for example, has returned more than 56% since October 2003, and is rewarding investors with a 6.5% yield. Or consider France Telecom (NYSE: FTE ) , which has returned 57% since January 2006, atop a current 4% yield.
Identify new talent
With the help of Motley Fool CAPS, we'll search for the best dividend-paying stocks around. Here are several dividend picks that have also earned high ratings from the 83,000-plus members of our CAPS community:
|
Company
|
Yield
|
CAPS Rating (5 max)
|
|
Nokia (NYSE:NOK)
|
2.2%
|
****
|
|
PepsiCo (NYSE:PEP)
|
2.2%
|
*****
|
|
Abbott Laboratories (NYSE:ABT)
|
2.3%
|
****
|
|
BP (NYSE:BP)
|
5.1%
|
****
|
|
Banco Bilbao (NYSE:BBV)
|
3.6%
|
****
|
Source: Capital IQ, Yahoo! Finance, and CAPS as of Feb. 7.
Stake your claim
When recession talk starts to heat up, investors often turn to the defensive stocks selling staple products. In short, they turn to companies like Pepsi, which sells everyday "must-haves" like Pepsi, Mountain Dew, Tropicana orange juice, Cap'n Crunch, Rice-A-Roni, Gatorade, Cheetos, and Cracker Jacks (for the love of snacks!).
But staples or not, Pepsi's shares sold off with the rest of the market through January and now are down nearly 12% from their previous high. This turned around a bit on Thursday, when the company reported December quarter results. The company's revenue showed strong growth for the quarter, and after backing out one-time charges, earnings per share were a penny above analysts' expectations.
Even more positive, though, was the company's outlook for 2008. In the face of a tough economy and rising food costs, Pepsi projected continued volume growth for the coming year, as well as a 9% bump in EPS.
Meanwhile, CAPS players have given Pepsi a solid five-star rating, with 1,778 players weighing in on the bull side. CAPS All-Star xthecritic likes the idea of using Pepsi as a defensive play in this pitch from a few days ago: "Consumer staples are outperforming and will continue to do so over the next 12 months with macroeconomic factors weighing on the overall market. Although it's scary that sugar water is a consumer staple that's just the way it is."
The flip side here is that using Pepsi as a defense against a weak economy has a short lifespan. While the company's results will likely hold up during a downturn, investors may lose interest in the stock when the economy does eventually recover. At that point, investors may be less impressed with the price they have to pay for the growth they're likely to get.
You can check out who else has been bullish on Pepsi, as well as chime in with your own thoughts, by heading over to CAPS. You may also want to check out a few of the other top-rated dividend payers above while you're there.
Dividend stocks could help you transform your portfolio from the flash-in-the-pan Florida Marlins into the dependable New York Yankees. And if you hate the Yankees, it's probably because they're so darn good, so darn often.
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