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? You're in luck: A high-quality dividend payer can be just the kind of day-in and day-out all-star 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 our Motley Fool Income Investor service's mission.
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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 (max 5) |
|---|---|---|
|
Pfizer |
4.2% |
**** |
|
McDonald's |
3.6% |
**** |
|
Williams Companies |
2.7% |
**** |
|
Vodafone |
4.0% |
***** |
|
Clorox |
3.5% |
**** |
Source: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as of May 21. 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 Clorox.
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 many of the dividend-loving investors that own the stock will run for the hills, causing the stock price to fall.
With that in mind, there are three places that I immediately tune into when kicking the tires of a dividend payer -- dividend history, balance sheet strength, and cash flow.
Looking back over the past 15-plus years, most dividend hounds would be very satisfied with Clorox's record. Not only has the company continuously paid out a dividend, but it has also raised its payout every year except one over this stretch. In fact, since 1991, Clorox has boosted its dividend nearly 400% -- all while maintaining a very comfortable payout ratio.
At first glance, Clorox's balance sheet doesn't look so hot. The company has a pretty small cash balance, a few billion in debt, and a negative book value. Digging a little bit deeper, though, we can find that the negative book value is due to all the money the company returns to its shareholders. Not only has it continually cranked out its dividend, but it's also been consistently buying back shares for more than a decade.
And recession or not, Clorox looks like it has the consistent, reliable cash flow to continue padding shareholders' pockets.
What the bulls say
Some may quibble with calling Clorox "dynamic." After all, how exciting are Clorox bleach, Glad garbage bags, and Kingsford charcoal? But when a company is returning as much cash to shareholders as Clorox is, I don't need adventure and excitement to get amped. Between the dependable performance from its core business, its growth and profitability improvement initiatives, and the strong growth it's seeing in its international segment, I'm ready to give Clorox's stock a thumbs-up.
But I'm not the only one positive on Clorox. Of the 448 CAPS members who've weighed in on the stock, 423 of them have rated Clorox an outperformer. CAPS All-Star jvaskonen chimed in back in December, touting the ability of the company and stock to withstand the recession:
Over the last 9 months, the S&P has dropped 40%. Clorox has hung pretty steady, fluctuating about 10%. They have a healthy P/E and the economic downturn has thus far not eaten into their profits much. I think there is more down in the S&P's future, but Clorox will weather that time well.
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.
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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