Dream Stocks for Dividend Investors

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and discover the 10 best stocks of the past decade. But I'm more interested in the tools that can help me evaluate tomorrow's greatest companies.

Motley Fool CAPS offers a variety of resources to aid Fools in finding tomorrow's leaders. Our 165,000-member community is full of investors helping each other beat the market.

We'll enlist CAPS to screen for high-yielding companies, then get the story behind some of its more highly rated stocks. CAPS' nifty screener will help us find stocks with:

  • A market cap of at least $1 billion.
  • A long-term debt-to-equity ratio of less than 0.5.
  • A dividend yield of at least 4%.
  • A price-to-earnings ratio of less than 25.

Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.

Opinions with the numbers
Below is a sample of stocks our screen returned.

Company

Dividend Yield

LT Debt-to-Equity Ratio

CAPS Rating
(out of 5)

Total SA (NYSE: TOT  )

4.7%

0.37

*****

NYSE Euronext (NYSE: NYX  )

4.0%

0.33

*****

Banco Santander (NYSE: STD  )

4.4%

0.49

****

Data and star rankings from CAPS as of Sept. 3.

Total
Total rewards investors with a generous dividend yield, topping even those of U.S.-based peers like ConocoPhillips and ExxonMobil (NYSE: XOM  ) , which are currently yielding 4% and 2.9%, respectively. The French oil major has also been a strong performer of late, posting a 43% jump in second-quarter earnings with sales growing 31%. The company is also giving a bullish outlook on the second half of the year. With a growing worldwide collection of assets like its shale play deal with Chesapeake Energy (NYSE: CHK  ) in the U.S., investors like the company's growth potential. Couple that with the strong recent momentum and growing demand for energy, and it's not a big surprise to see CAPS members rate Total a top five stars. Overall, 98% of the 999 CAPS members rating Total expect it to beat the broader market averages.       

NYSE Euronext
Amid a sea of shaky financial stocks, NYSE Euronext is a popular financial dividend payer among CAPS members as many believe its trading business has legs and falls largely outside the current turmoil in the financial sector. Steep competition has pressured margins in equities trading, but the company has seen its push into other business areas pay off, like its record derivatives trading volume in the second quarter. An agreement to form a joint venture with APX Inc., a company backed by investors such as Goldman Sachs (NYSE: GS  ) , will aim to take on others like IntercontinentalExchange in the growing market of electricity, renewable energy, and carbon trading. In CAPS, about 97% of the 2,462 members rating NYSE Euronext are bullish on its chances to beat the S&P.

Banco Santander
Banco Santander came out of the recent European stress tests as one of the best-capitalized banks across the pond, and many CAPS members see good potential in the bank's growing international presence. While Spain is still struggling to recover from the recession, Santander has seen strong profit growth in Latin America, which makes up about 40% of its profits. It's also been making moves to capitalize on the malaise by buying up assets like 318 Royal Bank of Scotland (NYSE: RBS  ) branches in the U.K. and a portfolio of U.S. car loans from HSBC Holdings. European banks don't come without significant risk, but with a solid five-year average annual dividend growth rate, many investors have confidence that Santander will come through. About 95% of the 812 CAPS members rating Banco Santander are bullish on the bank. 

Let 165,000 members be the jury
The collective wisdom of a huge pool of investors can help give context to a page of numbers from a stock screen. But individual investors are still the best judges of what to do with their own money. Fools should always perform their own due diligence.

Happily, it's easy to chime in with your own opinion. If you agree that these companies present dream opportunities -- or see more of a nightmare instead -- simply scroll down and add your thoughts in the comments box.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 65 points on average, take a free 30-day trial.

Fool contributor Dave Mock dreams of stocks and sugarplum fairies, but not together. He owns shares of ExxonMobil. Chesapeake Energy is an Inside Value pick. NYSE Euronext is a Rule Breakers recommendation. Total S.A. is an Income Investor pick. The Fool owns shares of Chesapeake Energy and ExxonMobil.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policyscreens the good, the bad and the ugly.


Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 08, 2010, at 1:10 PM, scanlin wrote:

    A potentially safer way to play NYX is with an in-the-money covered call. You can do a buy-write for the NYX Sep 28 for 27.97. You'll get the 30 cent div that goes ex on Sep 13, for a total return of 43% (annualized). Some risk of early exercise (if worried about it then do the Sep 29s instead). No earnings risk before expiration.

    MikeS

    http://www.borntosell.com

  • Report this Comment On September 09, 2010, at 3:46 AM, jbgoode33 wrote:

    Best Dividend Stocks: The S&P 500 Dividend Aristocrats 2010. Dividend Aristocrats are companies in the S&P 500 that have increased dividend payouts to shareholders every year for the last 25 years.

    http://www.dividend.co.nr

Add your comment.

DocumentId: 1293867, ~/Articles/ArticleHandler.aspx, 4/23/2014 4:30:05 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement