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5 Dynamic Dividend Stocks

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.

ONEOK (NYSE: OKE  ) , for example, has returned 93% since November 2005, and is currently rewarding investors with a 3% yield. Or consider Enterprise Products Partners (NYSE: EPD  ) , which has returned 75% since May 2004, atop a current 6.5% 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 105,000-plus members of our CAPS community:



CAPS Rating (5 max)

ConocoPhillips (NYSE: COP  )



Merck (NYSE: MRK  )



PepsiCo (NYSE: PEP  )



Frontline (NYSE: FRO  )



Entergy (NYSE: ETR  )



Sources: Capital IQ, Yahoo! Finance, and CAPS as of May 22.

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

Dependable dividends
As we know, not all dividend payers and dividend payouts are created equal. For that reason it's important to make sure that the dividend you're expecting isn't about to take an extended vacation with the dodo bird. To figure this out, I like to look at the prospects for the company's business, the company's history of paying dividends, and the sustainability of the current dividend.

Over the years, Merck has been a remarkably stable company that has grown its revenue and profits reliably while pumping out gobs of cash. It has done this by keeping up a steady stream of drug development and delivering blockbusters like Zocor, Fosamax, Cozaar, and Singulair. Despite this historical stability, though, investors have been worried recently about the company's outlook, as some of its major drugs -- including Zocor -- have come off patent and a number of its recent attempts to bring new blockbusters to market have fallen short.

As we focus specifically on the dividend, however, there should be little doubt that investors will continue to see their checks rolling in. Merck has an exceedingly long track record of not only paying, but also boosting its payout. It's been a few years since the last dividend boost, but Merck had enough cash flow to spend more than $4 billion buying back stock over the past three years.

On CAPS, the stock is rated four out of a possible five stars, with more than 1,600 investors who think it will outperform the S&P 500 index. One Merck fan, CAPS All-Star JDSancho, likes Merck because he knows a beaten-down stock when he sees one. "I'm not big on drugs or biotech, but [Merck] is way, way oversold. I'm not sure about valuation, but I know in 5 years, [Merck] will be higher, much higher."

You can check out who else has been bullish on Merck, 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.

More CAPS Foolishness:

ONEOK and Enterprise Products Partners are Income Investor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Yankees fan and Fool contributor Matt Koppenheffer hopes the Yanks can create some fireworks for the last year at Yankee Stadium, 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.

Read/Post Comments (2) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 23, 2008, at 12:29 PM, thelion44 wrote:

    Frontline Ltd (FRO) has paid good dividends for years. Whenever it is "downgraded" by someone, they do so because they think it's only a shipping company, and yet a good deal of it is way beyond transportation of oil. That's what the pundits don't get, But I love it when they talk it down as on any of those dips we accumulate. Thanks.


  • Report this Comment On June 07, 2008, at 2:53 PM, JDSancho wrote:

    Thanks for the publicity Matt. More importantly, Go Yankees!

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Related Tickers

10/21/2016 4:00 PM
MRK $61.20 Down -0.72 -1.16%
Merck and Co. CAPS Rating: ****
COP $41.54 Up +0.05 +0.12%
ConocoPhillips CAPS Rating: ****
EPD $26.75 Down -0.32 -1.18%
Enterprise Product… CAPS Rating: *****
ETR $74.17 Down -0.34 -0.46%
Entergy CAPS Rating: ***
FRO $7.71 Down -0.15 -1.91%
Frontline CAPS Rating: **
OKE $50.63 Down -0.28 -0.55%
ONEOK CAPS Rating: *****
PEP $105.62 Down -0.25 -0.24%
PepsiCo CAPS Rating: ****