5 Dynamic Dividend Stocks

The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s have 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 the mission of our Motley Fool Income Investor service.

National Grid (NYSE: NGG  ) , for example, has returned nearly 65% since July 2005, and it currently is rewarding investors with a 4.3% yield. Or consider William Wrigley Jr. (NYSE: WWY  ) , which has returned 41% since June 2006, atop a current 1.9% yield. While these stocks happen to be Income Investor recommendations, you don't need to be a subscriber to get these great gains.

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 93,000-plus members of our CAPS community:

Company

Yield

CAPS Rating (out of 5)

Sasol (NYSE: SSL  )

2.4%*

*****

Administradora de Fondos
de Pensiones Provida
(NYSE: PVD  )

5.6%*

*****

Vector Group (NYSE: VGR  )

9.2%

*****

Emerson Electric (NYSE: EMR  )

2.3%

*****

Lloyds TSB Group (NYSE: LYG  )

7.8%*

*****

Sources: Capital IQ, Yahoo! Finance, and CAPS as of March 27, 2008.
*Trailing yield.

Any one of these quality companies would add dividend excellence to your portfolio, but I thought I'd kick off further research with a closer look at Emerson Electric.

Dependable dividends
Fans of Ben Graham may remember Emerson Electric from his classic The Intelligent Investor. At the time that the book was written, Emerson was a much younger company and wasn't of much interest to Graham because of its heady multiple and highflier status. Of course, at that point -- nearly 40 years ago -- the company was already paying a dividend.

While I don't have data that tracks Emerson back to the time that Graham wrote about it, I looked back to 1982, and what I found was pretty remarkable. At the beginning of '82, Emerson was trading at a split-adjusted $3.67. The 1,300% percent appreciation of the stock price since then is nothing to shrug at, but what struck me even more is that investors who bought in 1982 are currently earning 32.7% annually on their original investment from dividends alone. How's that for the power of dividends?  

Every investor has heard more than a few times that past performance is not necessarily indicative of future results, and that certainly applies to Emerson. But even if investors aren't banking on another 1,300% run over the next 20 years, there are plenty of top investors on CAPS who think Emerson is worth a look. One of these savvy investors, Fuskie, is bullish on Emerson and wrote last September: "I was looking for quiet, stable, solid company to forget about. So my pitch to you is to forget about Emerson. Right after you stake your position, that is."

You can check out who else has been bullish on Emerson, as well as chime in with your own thoughts, by heading over to CAPS. You may want to check out a few of the other top-rated dividend payers listed above while you're there.

Dividend stocks could help you transform your portfolio from the flash-in-the-pan Florida Marlins to 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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