Ruth, Jordan, Montana. You don't have to be a sports fan to recognize those names, and there's a very good reason for that. All three of these athletes made magic happen whenever they competed. Even more importantly, when the chips were down, you could still count on these guys to deliver.
In times of economic turmoil, wouldn't it be great to have a performer like that in your portfolio? Well, high-quality dividend payers can be just that kind of day-in and day-out all-star that you're looking for.
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. At the same time, they can provide a solid defense against crazy market conditions. Finding them is the mission of our Motley Fool Income Investor service.
StatoilHydro (NYSE: STO), for example, has beaten the S&P 500 by 59 points since October 2006, and it currently is rewarding investors with a 8.5% yield. Or consider Partner Communications (Nasdaq: PTNR), which has topped the S&P by 34 points since May 2007, atop a current 9.9% 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 130,000-plus members of our CAPS community:
|
Company
|
Yield
|
CAPS Rating
(out of 5)
|
|
Aluminum Corp of China (NYSE: ACH)
|
2.7%
|
*****
|
|
3M (NYSE: MMM)
|
4.1%
|
*****
|
|
General Dynamics (NYSE: GD)
|
3.9%
|
****
|
|
Archer Daniels Midland (NYSE: ADM)
|
2%
|
****
|
|
Lockheed Martin (NYSE: LMT)
|
3.4%
|
****
|
Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of March 19. All yields listed are trailing and may not reflect recent corporate actions.
If you like what you see, but want more, you can run this screen for yourself with CAPS' handy screener. While these are not formal recommendations, they're a great place to kick off further research and potentially add some dividend excellence to your portfolio. In fact, I'll even kick you off with some thoughts on General Dynamics.
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, because not only do you lose your dividend payout, but many of the dividend-loving investors that own the stock will run for the hills as well, causing the stock price to fall.
With that in mind, there are three things I immediately look for when kicking the tires of a dividend payer -- dividend history, cash flow, and balance-sheet strength. General Dynamics is doing very well when it comes to the first two categories. It's been paying dividends since 1991, and though it hasn't raised the payout every single year, it's been pretty consistent -- the company has raised the dividend more than tenfold overall. And we don't want to ignore the fact that, at a time when most companies are cutting their dividends or eliminating them altogether, General Dynamics boosted its payout.
Cash flow is also impressive, and though the company spends a significant amount of money on acquisitions, it spends far less on capital expenditures, leaving it plenty of cash for the dividend. The balance sheet isn't quite at the level of the other two categories, given its $3.1 billion of debt. That debt, however, is less than a third of General Dynamics' overall equity, and the interest payments are well covered by operating income.
What the bulls say
Though General Dynamics isn't quite a five-star stock on CAPS, it does have more than 1,000 members who have given it a thumbs-up. Fellow Fool and CAPS All-Star Toby Shute weighed in on the stock last month, noting:
Part of the defense industry oligopoly that Bruce Berkowitz is betting on. Consistently high ROE and strong free cash flow generator. Healthy balance sheet and dividends rising at a nice clip.
More recently, KnockoutMouse also came in on the bullish side, asserting:
This company makes the armored vehicles that help our troops survive in the guerrilla warfare environments of the future. They make the submarines , destroyers and littoral combat vessels that will be the basis of naval power in the 21st century. America needs this stuff no matter how the economy is doing or who the President is because our basic security depends on it.
Get into the action
You can check out who else has been bullish on these stocks, 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 Bad News Bears to the Dream Team. And really, could you argue with having Michael Jordan, Magic Johnson, and Sir Charles Barkley help your portfolio chalk up wins?
More CAPS Foolishness:
“The Next Great Investment”… That’s how a top global investor describes India’s potential. On Nov. 28, The Motley Fool’s Tim Hanson returns to India to prove it. Follow along in real time and get his TOP pick first (Hanson returned from China in July with a stock that’s up 169%!). Enter email below.
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