Ruth. Jordan. Montana. You don't have to be a sports fan to recognize those names, with good reason. All three of these athletes made magic happen whenever they competed. Even more importantly, when the chips were down, you could still count on them to deliver.
In times of economic turmoil, wouldn't it be great to have a performer like that in your portfolio? High-quality dividend payers can be just that kind of all-star, day after day.
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 repeatedly shown. At the same time, they can provide a solid defense against crazy market conditions. Finding them is our Motley Fool Income Investor service's mission.
Huaneng Power, for example, has beaten the S&P 500 by 33 points since March 2008, and it's rewarding investors with a 6.8% yield. Or consider Southern Company, which has topped the S&P by 52 points since November 2003, atop a 4.6% yield. These stocks happen to be Income Investor recommendations, and other stocks could bring you great gains like these.
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 120,000-plus members of our CAPS community:
|
Company
|
Yield
|
CAPS Rating (max 5)
|
|
Union Pacific (NYSE: UNP)
|
2.3%
|
****
|
|
Intel (Nasdaq: INTC)
|
4%
|
****
|
|
Vimpel-Communications (NYSE: VIP)
|
5.2%
|
****
|
|
US Bancorp (NYSE: USB)
|
6.8%
|
****
|
|
BP (NYSE: BP)
|
7.1%
|
*****
|
Source: Yahoo! Finance and CAPS as of Dec. 11.
While these are not formal recommendations, they're a great place to start further research. In fact, I'll begin with some thoughts on US Bancorp.
Does my dividend have a glass jaw?
The last thing we want in a dividend-paying company is the risk that the company will fall off a cliff and have to pull back its dividend. This usually ends up being a double whammy; not only do you lose your dividend payout, but also a substantial portion of dividend-loving investors, who run for the hills and take the stock's price with them.
It's hard to say that any bank's dividend is rock-solid in this environment, but US Bancorp -- along with Wells Fargo (NYSE: WFC) -- may be as close as it gets. US Bancorp's payout ratio (the dividend paid divided by earnings) was more than 100% for the most recent quarter, and roughly 85% for the first nine months of the year -- uncomfortably high. However, US Bancorp has paid a dividend for 146 straight years, and the dividend is a source of pride for the company, so it's likely that only extreme necessity would end that payout.
What the bulls say
If you're going to own a bank during a financial crisis, you have to pick carefully. Former top dogs in the industry, like Citigroup (NYSE: C), have gotten the cold shoulder from CAPS members. But with a four-star rating and the upraised thumbs of nearly 1,600 CAPS members, you can bet that there's plenty of bullish chatter on CAPS for US Bancorp. Member mitleg, for example, recently rated US Bancorp an outperformer, writing:
The best run major bank. Trades at a modest premium to some of its peers, but due perhaps to the fact it has not made any news during the credit crisis. It has a nice dividend yield which appears safe. A solid conservative pick.
Get into the action
You can check out who else has been bullish on these stocks, and 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.
A dividend payer could become a Tiger Woods or a Joe Montana in your portfolio, giving it some stability.
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