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 our Motley Fool Income Investor service's mission.

PepsiCo (NYSE: PEP), for example, has returned 36% since November 2008, and it currently is rewarding investors with a 2.9% yield. Or consider Waste Management (NYSE: WM), which has climbed 21% since October 2008, atop a current 3.7% 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 our 160,000-member CAPS community:

Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS as of April 8. 

Let's take a closer look at how these dividend payers stack up.

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 places that I immediately tune into when kicking the tires of a dividend payer -- dividend history, financial statements, and business stability.

When it comes to dividend history, both Nucor and Kinder Morgan Energy Partners have stellar records. Over more than a decade, both companies have shown a commitment not only to paying their shareholders, but consistently increasing that payout. Of course, when it comes to a rock-solid dividend history, it's hard for anyone to top Altria.

On the flip side, Constellation's record is fairly lackluster and includes a hefty dividend cut just last year.

Nothing jumps out as overly worrisome about the financial statements of any of these companies. Both Altria and Nucor produce cash flow well above the amount they spend on capital spending, leaving plenty left over to return to shareholders. And while Constellation spends goodly amounts of its cash on capital improvements -- which is typical of an electric utility -- the company has a surprisingly light debt load.

Nucor is the company that will likely provide investors with the biggest swings in the future. While it's a mighty fine company, the steel industry is very cyclical, so Nucor's results are bound to soar and dive along with the economy's squiggles. And while utilities are typically pretty dependable, Constellation hasn't exactly given investors a good reason to expect dependability, with its income bouncing around in the past few years.

The rest of the group are very stable businesses. Even Hasbro, which investors might expect would be fairly cyclical, has proven through this last recession that fun and games have a place even during economic downturns.

Going the distance
While it's hard to go against Altria when it comes to dividends, I'm going to shake things up and make Nucor my top pick of this group. Nucor is a solid business with a very good dividend history and great financials. And it certainly doesn't hurt that the economy appears to be heading into an upswing.

CAPS All-Star latimerburned gave Nucor's stock a thumbs-up last month and said:

Great firm that is effeciently run with a fantastic CEO. Poised to benefit from the growth in infrastructure, stimulus and steel prices. Decent dividend that keeps going up and if they have a great year they pay an extra dividend which I expect to see again.

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 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.

Yearning for even more dividend action? Adam Wiederman has the best yields for the next 10 years.