The CAPS Screen: 5 Dividend Dynamos

Dividend investing is a tried-and-true strategy for building long-term wealth. A company that maintains a stable and healthy dividend is one that will continue to pay you over time regardless of how the market zigs and zags. After all, most of the stock market's gains in recent decades have come from dividends.

In order to find dividend studs like General Electric (NYSE: GE  ) and Johnson & Johnson (NYSE: JNJ  ) (both of which have returned more than 14% annually over 30 years) I used our new CAPS screening tool to look for companies that pay a strong dividend. Below are five companies with dividend yields of at least 4%.

They also have:

  • Market caps greater than $1 billion.
  • Five-star ratings, the highest possible, from our CAPS community.

Remember, in the first year for which we have data, five-star companies outperformed with an average gain of nearly 28%.

Company

Share Price

Sector

Market Cap (in billions)

Dividend Yield

America Movil (NYSE: AMX  )

$51.30

Technology

$89.3

4.2%

BP (NYSE: BP  )

$65.54

Basic materials

$206.5

4.7%

Frontline (NYSE: FRO  )

$64.34

Services

$4.8

15.8%

Precision Drilling Trust (NYSE: PDS  )

$26.52

Basic materials

$3.3

5.6%

Pengrowth Energy Trust (NYSE: PGH  )

$19.79

Basic materials

$4.9

13.5%

Data from Motley Fool CAPS and Yahoo! Finance as of July 2.

Remember, this screen is only a starting point in the research process. When selecting dividend payers, Fools know it's important to make sure a company has sufficient free cash flow to sustain and grow its dividends for years to come.

Come and join us on Motley Fool CAPS to dig into these companies further. Let our 110,000-strong (and counting) CAPS community help you make better stock selections.

For more Foolery:

Ilan Moscovitz doesn’t own shares of any companies mentioned. He thinks the CAPS screen is the new four square. Johnson & Johnson is a Motley Fool Income Investor recommendation. Precision Drilling Trust is a Global Gains pick. The Fool's disclosure policy calls spikes.


Read/Post Comments (4) | Recommend This Article (7)

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 July 03, 2008, at 4:05 PM, foolishSole wrote:

    foolish Questions

    How often do we see five star CAPS companies with dividend much higher the company earnings? Can companies continue to borrow money to distribute as Dividend to share holders for a long time?

    my questions are in regard to PGH, who ever ranked this company to be five stars, did they see/consider the company financial statements. if yes, I would like to learn the rational they used to justify their ratings. is it pure technical analysis? if yes what specific technical analysis techniques they uses. Cheers

  • Report this Comment On July 05, 2008, at 10:46 AM, flo1111 wrote:

    I have owned the Canadian version of PGH ( PGF.UN TSE ) since 2001. This doesn't make me an expert by any means, but I can tell you this: PGH is undervalued. I believe that what is holding the share prices back are the impending tax implications in 2011 and the tremendous amount they hedge on oil. If you are patient you can buy it on the next dip, which are often overexxagerated in response to the dip in oil.

    I am under the impression that the earnings reported are after dividend payouts. I am also under the impression that the money Pengrowth borrows is to to fund purchases of new oil and gas fields. They have made many acquisitions over the last couple of years. Doesn't mean I am right....maybe someone who is sure will comment : )

  • Report this Comment On July 07, 2008, at 1:27 PM, philsie1 wrote:

    Sole,

    I'm afraid you're a little off in your assessment of PGH. It's not a matter of divies vs. earnings. It's divies vs cash flow. Last Q they claimed an earnings loss but had huge positive cash flow, most of which goes to paying distributions (not really divs).

    The losses came because their hedges didn't earn them as much as the market rate; a paper loss. PGH is a solid company paying solid distributions (over 10% after taxes) not to mention capital appreciation for those taking advantage to buy on the dips.

  • Report this Comment On July 14, 2008, at 10:29 AM, seca82 wrote:

    Yep - I got in with ~16% div/dist on a dip. Very nice div/dist, and the 20% gain in stock price is gravy... Not bad considering many other stocks are in the tank.

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