The CAPS Screen: 5 All-Star Dividend Stocks

I've noted before that dividend investing is a tried-and-true strategy for building long-term wealth. In fact, a study by Ned Davis Research found that dividend-paying stocks have outperformed their stingier counterparts 10% vs. 4% annually from 1972 to 2006.

In other words, you can generate sizable investment returns even during times of market turmoil if you can identify dividend stocks that will set you for life.

In order to find dividend studs like Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE), which have grown their respective dividends 15% and 17%, respectively, over the past five years, I used the Fool's new CAPS screening tool.

Below are five companies which have been rated to outperform the market by more than 50 All-Stars, CAPS members whose track records rank them in the top 20th percentile of our 115,000-member (and growing!) investing community.

These stocks also have:

• Market caps greater than $2 billion.
• Dividend yields greater than 2%.
• Four- or five-star ratings from our CAPS community.

In the first 20 months after we began tracking the collective intelligence of our CAPS investment community in November 2006, four-star companies outperformed the market on average by 7% annualized. Five-star stocks did even better.

Company	Sector	Dividend Yield	All-Stars Rating Outperform
Intel Corp (Nasdaq: INTC)	Technology	3.5%	1238 / 1360
ExxonMobil (NYSE: XOM)	Basic Materials	2.2%	1238 / 1360
General Electric (NYSE: GE)	Conglomerates	5.9%	1192 / 1307
Honda Motors (NYSE: HMC)	Consumer Goods	3.4%	340 / 353
J.M. Smucker (NYSE: SJM)	Consumer Goods	2.8%	57 / 59

Data from Motley Fool CAPS, Yahoo! Finance as of Oct. 16, 2008.

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.