Dividend Investors' Dream Stocks

Investors are always hunting for the next big stock -- the dream stock that becomes a multibagger when the market finally discovers it. It's easy to look back and see what the 10 best stocks of the past decade were. But for my part, I'm more interested in the tools that can not only help me find new stock ideas, but also allow me to evaluate tomorrow's greatest companies.

There is a tool that offers a variety of resources to help with finding tomorrow's leaders: Motley Fool CAPS.

We can use CAPS to not only screen for top dividend stocks, but also get the story behind them. CAPS' nifty screener will help us find stocks with:

  • A market cap of at least $1 billion.
  • A long-term debt-to-equity ratio of less than 0.5.
  • A dividend yield of at least 4%.
  • A price-to-earnings ratio of less than 25.

Then we'll tap the collective intelligence of our 110,000-plus CAPS investors to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.

Opinions with the numbers
Here's a sampling from the list of stocks our screen pulled up today.

Company

Dividend Yield

CAPS Rating (out of 5)

Diana Shipping (NYSE: DSX  )

10.7%

*****

Pfizer (NYSE: PFE  )

7.4%

***

Southern Copper (NYSE: PCU  )

6.2%

*****

Precision Drilling Trust (NYSE: PDS  )

5.9%

*****

Altria (NYSE: MO  )

5.6%

*****

Yield subject to change. Data and star rankings from CAPS. All data as of June 23.

Talk about a dream stock: Altria has been paying an uninterrupted dividend since 1928. The company has not only survived brutal tobacco lawsuits, but has thrived for investors. And the trend continues -- after spinning off Kraft Foods (NYSE: KFT  ) last year and Philip Morris International (NYSE: PM  ) this year, Altria has shed about $1 billion in annual overhead costs. With a legacy for great returns and a juicy dividend, more than 96% of the 6,484 investors rating Altria think it will continue to clobber the market.

With the soaring prices for fuel and other basic materials, it's no surprise to find a pair of commodity plays also showing up on our CAPS dividend screen. Miner Southern Copper, holder of the largest amount of copper reserves of any publicly traded company, has been booming along with increased demand from emerging markets such as China and India. With a rock-solid balance sheet, the company has plenty of cash on the books to fund long-term growth initiatives that will increase total copper production by 270,000 tons -- or 39% -- by 2011.

Canadian driller Precision Drilling Trust is looking to expand as well, and has put an improved $1.66 billion offer in front of American driller Grey Wolf to become a premier North American onshore oil and gas driller. Grey Wolf spurned the offers, however; it had a tie-up with Basic Energy Services already in the works that was due to come before shareholders in a vote on July 15. But basic supply and demand still drive these commodity kings -- of the CAPS investors rating them, both Southern Copper and Precision Drilling have more than 96% making bullish calls.

Ditto that bullish outlook for Diana Shipping, which can afford an outsized dividend thanks to its ability to command higher and higher dayrates. The shipper continues to see demand outstrip capacity -- in fact, one of its new vessels that is still under construction, with plans to launch in 2010, is already booked through 2015. With that much pent-up demand, it's easy to see why nearly 97% of the 1693 investors rating Diana believe it will outpace the market.

Another longtime dividend payer, drugmaker Pfizer, hasn't given investors nearly as much to cheer about. With its blockbuster drug Viagra now 10 years old, Pfizer has been struggling to find a growth trend -- even with major acquisitions that include Warner-Lambert. Even with a great yield today, CAPS investors have withheld dream status from Pfizer. While some think getting shares on the cheap may be one of the best opportunities this decade, 525 of the 3,879 investors rating Pfizer in CAPS maintain a bearish stance on the stock.

Let 110,000 investors be the judge
The collective wisdom of a huge pool of investors can help give context to a page of numbers created by a stock screen. But even with an entire community of qualified opinions acting as the judge, individual investors are still the jury and should perform their own due diligence.

Want to run your favorite parameters through the screener in Motley Fool CAPS? All the resources there are totally free, and definitely beat a sharp stick in the eye. See for yourself.

The Motley Fool Global Gains service has selected Precision Drilling and dozens of other promising international investment opportunities. Check out the stocks that have the international investing service beating the market by four points free for 30 days.

Fool contributor Dave Mock dreams of stocks and sugarplum fairies, but not together. He owns shares of Pfizer and is the author of The Qualcomm Equation. Precision Drilling is a Global Gains recommendation. Pfizer and Kraft Foods are Income Investor picks. Pfizer is also an Inside Value recommendation. The Fool's disclosure policy screens the good, the bad, and the ugly.


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