5 Dynamic Dividend Stocks

The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s have one crucial element in common: consistent excellence in their organizations and performance. That's a rare accomplishment, but if you think it could never occur in your portfolio, think again. Carefully chosen dividend-paying stocks could be your key to superstar returns.

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. Finding them is the mission of our Motley Fool Income Investor service.

Enterprise Products Partners, for example, has beaten the S&P 500 by 66 points since May 2004, and it's currently rewarding investors with a 7.8% yield. Or consider Alliance Resource Partners, which has topped the S&P by 40 points since November 2006, atop an 8.2% 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 135,000 members of our CAPS community:

Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of July 16, 2009. 

Any one of these quality companies would add some dividend excellence to your portfolio. Let's take a closer look at why CAPS members think China Mobile is worth a hard look.

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 who own the stock will also run for the hills, causing the share 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, financial statements, and business stability.

Because 2003 was the inaugural year for China Mobile's dividend, the company doesn't have a particularly long history for us to look back on. That relatively short history is pretty encouraging, though. In the six years since the mobile giant green-lighted its payout, it's increased the kickback more than 600%.

Turning to the financial statements, we get some comfort that, despite the heavy payout growth, the dividend is sustainable. China Mobile's payout ratio -- the ratio of dividend payments to earnings -- has grown, but was still at a very manageable 43% in 2008. While the company does have a chunk of debt on its balance sheet, it carries far more cash, and has its interest payments more than suitably covered.

And by studying the cash flow statement, we can find that the company's cash flow is significantly higher than its net income. This cash flow is more than enough for China Mobile to comfortably pay for its capital equipment and deliver on its dividend commitment.

Investing abroad, particularly when it comes to emerging markets, adds some wrinkles to the process beyond what we might find with U.S. companies. However, China Mobile isn't just the largest mobile services provider in China; its subscriber count easily tops U.S. mobile giants like Verizon (NYSE:VZ) and Sprint Nextel (NYSE:S). In fact, it's the largest in the entire world.

In short, its status as the Apollo Creed of the mobile communications world -- with no Rocky Balboa in sight -- makes it easier to cozy up to its stock.

What the bulls say
I have given China Mobile a thumbs-up in my CAPS portfolio, but I'm hardly alone. This "Count of Monte Fisto" of the mobile services industry has a very strong fan base in the CAPS community. Of 3,252 members who have weighed in on the stock, 3,166 have given it a thumbs-up.

CAPS All-Star HLChin recently became one of the many China Mobile bulls, pointing out the opportunity for the company to continue growing for the foreseeable future:

There is apparently a 49% penetration rate of mobile phones in China, with another half to go, I reckon that this company will be eventually worth more than the 180B-190B market cap.

Get into the action
You can check out who else is 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 flash-in-the-pan Florida Marlins into the dependable New York Yankees. And if you hate the Yankees, it's probably because they're so darn good, so darn often.

More CAPS Foolishness:

• 5 Stocks With a Bright Future
• America's Next Top Growth Stock
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