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.
South Jersey Industries (NYSE: SJI ) , for example, has beaten the S&P 500 by 51 points since December 2006, and it’s currently rewarding investors with a 3.3% yield. Or consider Total (NYSE: TOT ) , which has topped the S&P by 45 points since December 2003, atop a current 6.0% 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 (5 stars max.)
|
|
ExxonMobil (NYSE: XOM )
|
2.3%
|
****
|
|
Valero (NYSE: VLO )
|
3.4%
|
*****
|
|
Burlington Northern Santa Fe (NYSE: BNI )
|
2.7%
|
****
|
|
Nucor (NYSE: NUE )
|
3.7%
|
*****
|
|
Applied Materials (Nasdaq: AMAT )
|
2.2%
|
****
|
Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of April 2. 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 ExxonMobil.
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 who own the stock will run for the hills, causing the stock price to fall.
With that in mind, there are three things I immediately tune into when kicking the tires of a dividend payer -- dividend history, balance-sheet strength, and cash flow. On the first criterion, Exxon has been paying dividends for a long, long time. While many companies can measure their dividend history in years, Exxon can do it in decades. Not only that, but the company also has a good record of boosting its payout -- over the past decade, it's upped its dividend every year at an average annual rate of 6.5%.
Exxon's financial statements only make the dividend look better. The company's balance sheet is flush with $32 billion in cash against around $9 billion in short- and long-term debt. As for where that cash comes from, the cash flow statement reveals that the company churns out a heck of a lot of cash from operations -- much more than it needs to invest in capital spending. In fact, the company has produced so much cash over the past few years that not only has it easily paid out its dividend, but it's also spent tens of billions on share buybacks.
What the bulls say
Jumping over to the CAPS community, CAPS All-Star Alex1963 recently became one of the nearly 6,000 members who have rated ExxonMobil an outperformer. Alex wrote: "Terrific cash position, excellent mgt & margins. I'm not worried long term about any change in US treatment for oil companies hurting them much."
Though I largely agree with Alex, it's also important to note that Exxon isn't exactly on easy street right now. Like all the other oil companies out there, Exxon is looking at oil and gasoline prices that are way down from the heights they reached last summer. Industry behemoth or not, that's going to hurt, and current analyst estimates reflect that – full-year 2009 earnings per share are expected to fall 47% from 2008.
During uncertain times, though, a stock like Exxon can be a stable performer to anchor a portfolio. The company's financial stability goes a long way when other companies are taking huge government bailouts. And though oil prices have been extremely volatile, oil will undoubtedly continue to be in demand for a long time.
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?
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