7 Stocks to Start You Off

Why should late-night DJs get to offer all the dedications? I hereby dedicate this article to newcomers to the investing arena, to people who've freed up some cash to invest, and to those who understand that this sluggish stock market presents them with a rare and exciting opportunity.

If you're ready to invest, you may be facing one big question: which stocks to start with. After all, there are thousands to choose from. You could take the easy (and quite reasonable) route and invest in a broad-market index fund. Even investing great Warren Buffett believes most people are better off following that strategy.

But to aim even higher, you may want to put some or all of your money in individual stocks. And in my opinion, healthy dividend payers could be the best place to start your search.

Start with reliability
To look for the cream of the crop in the dividend world, take a gander at Standard & Poor's list of Dividend Aristocrats. (My colleague Joe Magyer offers some other excellent dividend-seeking tips.)

The Aristocrats are S&P 500 companies that have increased their dividends every year for at least 25 years. Here are some Aristocrats you might consider for your portfolio, along with their dividend growth rates:

Sources: Standard & Poor's, MSN Money.

When evaluating dividend payers, consider more than just the current yield. A company offering a yield of 5% might seem more attractive than a company of seemingly equal quality paying 3%. But if the former company features irregular and anemic dividend increases, while the latter has averaged 12% annual hikes, that 3% will become more than a 5% effective yield for you in just a few years. And over 10 or 20 years, that accumulation could really pack a punch.

What makes dividends so important?
It's not exactly a secret: Dividends accounted for 41% of the S&P 500's return between 1926 and 2006. And according to Ned Davis Research, between January 1972 and April 2009 (a period that included booms and busts), dividend payers returned 7.8% annually, crushing the 0.7% annual return of stingier stocks.

Even if their stock itself stalls, healthy, growing companies -- like the Aristocrats above -- will keep paying you their dividend. During 2008, many solid companies actually increased their dividends.

The seven stocks I've listed for you aren't formal recommendations -- just good starting points for your own due diligence. Nor are they the only dividend candidates for your portfolio. We'd love to introduce you to some other ideas, along with some valuable lessons in dividend investing, with a free 30-day trial to our Motley Fool Income Investor advisory service. On average, its picks are beating the market handily, even as they offer an average current yield of 5.5%. Nineteen of our recommendations sport yields above 6%! Click here to learn more about a free 30-day trial (there's no obligation to subscribe).

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Longtime Fool contributor Selena Maranjian owns shares of Coca-Cola and McDonald's. Coca-Cola is a Motley Fool Inside Value and Motley Fool Income Investor selection. The Motley Fool is Fools writing for Fools.