This Millennium's 15 Best Dividend Stocks

I'm always on the lookout for the next home run stock.

At the end of each year, I like looking back to see what I can learn from the best and worst performing stocks over the long term. I make sure to key in on dividend stocks as they have a history of outperforming the market.

By examining the top performers of the past 11 years, I want to key in on traits that top performers of the 2010s should have. In my search, the only restriction I set was that the market cap needed to be higher than $500 million, and the companies had to pay dividends every year. Look at this year's list:

 

Company

11-Year Return

Current Yield

1

BP Prudhoe Bay Royalty Trust (NYSE: BPT  )

6,012.7%

7.8%

2

Southern Copper (NYSE: SCCO  )

3,336%

1.0%

3

Holly (NYSE: HOC  )

2,958.4%

1.4%

4

World Fuel Services (NYSE: INT  )

2,084.8%

0.4%

5

Precision Castparts (NYSE: PCP  )

2,081.6%

0.1%

6

Lufkin Industries (Nasdaq: LUFK  )

2,010.3%

0.8%

7

Potash Corp. of Saskatchewan

1,943.9%

0.2%

8

Occidental Petroleum

1,097%

1.9%

9

Permian Basin Royalty Trust

1,082.2%

6.6%

10

Cummins

1,056.8%

1.0%

11

EOG Resources

996.5%

0.6%

12

Seaboard

983.2%

0.1%

13

Ametek

902.2%

0.4%

14

SM Energy

892%

0.4%

15

Tanger Factory Outlet Centers

886.3%

3.1%

Source: Capital IQ, a division of Standard and Poor's. Return from Dec. 31, 1999 to Dec. 31, 2010.

BP Prudhoe Bay Royalty Trust was the top dividend stock of the millennium so far with an 11-year return of 6,012.7%. So what do all these stocks have in common?

 

Company

Market Cap on 12/31/1999

1

BP Prudhoe Bay Royalty Trust

$194 million

2

Southern Copper

$1.23 billion

3

Holly

$110 million

4

World Fuel Services

$91 million

5

Precision Castparts

$643 million

6

Lufkin Industries

$96 million

7

Potash Corp. of Saskatchewan

$2.61 billion

8

Occidental Petroleum

$7.95 billion

9

Permian Basin Royalty Trust

$265 million

10

Cummins

$2 billion

11

EOG Resources

$2.09 billion

12

Seaboard

$289 million

13

Ametek

$613 million

14

SM Energy

$275 million

15

Tanger Factory Outlet Centers

$163 million

Source: Capital IQ.

They were all small-caps or mid-caps at the beginning of the millennium and were paying dividends.

Dividend champions
So why have these companies' stocks done so well? You'd figure Wall Street would have caught on, but analysts only have so much time, so many small-cap stocks are often overlooked. That creates a perfect opportunity for enterprising investors to capitalize on Wall Street's lack of vision by getting in on companies on the cheap before Wall Street has discovered them.

One small-cap stock for the rest of the millennium!
Sorry -- that's not happening. I highly doubt that any companies around today will be with us in 3000. The technological rate of change is too fast, and historically the odds aren't good. According to Wikipedia, only 11 companies that were around 1,000 years ago are still with us today (four of which are Japanese hotels). While we can't know for sure what the best dividend stock this millennium will be, I asked our team of investment analysts for their favorite small-cap dividend stock.

They recommended AmTrust Financial Services (Nasdaq: AFSI  ) .

Company

Yield

Market Cap

P/E

CAPS Rating (out of 5)

AmTrust Financial Services

1.8%

$1.07 billion

8.0

*****

AmTrust Financial Services is a growing niche insurance company that generates consistently attractive profits and returns on equity. With shares priced around $17.75, they trade at a forward price-to-earnings ratio of just over 7, a dividend yield just under 2%, and a price-to-book value just over 1.5. For a profitable, growing company, this is a great opportunity for investors. Having navigated the financial sector's meltdown successfully, AmTrust is positioned to grow over the course of 2010 and beyond.

By focusing on the small-business sector and highly profitable insurance niches -- especially workers' comp and extended warranties -- AmTrust has carved itself a large footprint in specialized markets. The company's high renewal rates are an especially attractive feature, as they give a recurring revenue stream and indicate that AmTrust has a strong competitive position.

Beyond the attractive valuation, AmTrust is relatively small and obscure; only one Wall Street analyst provides revenue estimates for the company. As more investors become familiar with the company, the valuation will likely rise, and stockholders will reap the spoils.

Your next step
AmTrust is a strong dividend stock for your portfolio. If you're looking for more great dividend stocks to round out your portfolio, look at a new free report from Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," which includes a stock named by a senior analyst as "the dividend play of a lifetime." Tens of thousands have requested access to this report, and today I invite you to download it at no cost. To get instant access to the names of these 13 high yielders, simply click here -- it's free.

Dan Dzombak doesn't own shares in any of the companies mentioned in this article. The Fool owns shares of AmTrust Financial Services. Precision Castparts is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (95)

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 January 25, 2011, at 12:33 PM, mjthinker wrote:

    Pls check the analysis in this article which shows that BPT is only worth $45.

    http://seekingalpha.com/article/247756-bp-prudhoe-bay-royalt...

  • Report this Comment On January 25, 2011, at 2:29 PM, rwmcmullin wrote:

    Why would you consider a stock with an 80 to 1 debt/equity ratio a good stock...?

  • Report this Comment On January 25, 2011, at 5:03 PM, aidanallen wrote:

    I currently own shares in Pengrowth Energy, a Canadian company and it has paid me a regular dividend ( once a month ) of approximately 7%. I am in their dividend reinvestment plan an have seen my account grow substantially in the last year. I don't hear mention of it in any fool reports Not only does it pay a good dividend but a nice share value increase in the time I have owned these shares.

  • Report this Comment On January 26, 2011, at 12:55 PM, rogue95 wrote:

    UVE looks better across the board and is in the same industry.

  • Report this Comment On January 26, 2011, at 12:55 PM, JustEconist wrote:

    Please notice the news for BPT (on fool,s site) before buying it:

    http://caps.fool.com/Ticker/BPT.aspx

    "

    BPT News and Commentary

    BP Prudhoe Bay Shares Plunged: What You Need to Know

    21 hours ago – The Motley Fool"

  • Report this Comment On January 28, 2011, at 12:51 PM, whyaduck1128 wrote:

    BPT is a royalty trust, and the computation of taxable income is somewhat complicated.

    With regular corporations, what you get is what is taxed (with the occasional exception of return of capital). Royalty trusts make cash distributions, but what you're taxed on is a completely different matter, something that has to be calculated after year-end using information issued by the company. This income number increases your basis, while the cash distribution reduces your basis. This also makes a calculation of gain/loss impossible until year end.

    If you have a good accountant or are good at computing this kind of thing yourself, no problem, just extra work. If not, good luck.

    Sure, the yield on some royalty trusts looks high, but very often, what you're getting is a return of capital, not income. I thought I'd mention this as a caveat.

  • Report this Comment On January 30, 2011, at 11:50 AM, mikecart1 wrote:

    These back-in-time articles help no one. Just sayin.

  • Report this Comment On February 28, 2011, at 2:17 PM, stocksidiot wrote:

    Some of the stocks you mentioned are indeed bargain dividend paying stocks, e.g. the BP Prudhoe Bay Royalty Trust which has a p/e ratio of 11.72 and a 7.7% dividend yield. Permian Basin Royalty Trust is also trading at 15 times earnings and has a 6.33% dividend yield, pretty impressive. What I also like about Permian is that it pays monthly dividends. Although they have lowered their distributions from 13 cents to 10 cents a share.

    Here's another list of 5 high yielders that are in favour from the market these days http://www.high-yield-dividend-stocks.com/5-stocks-raising-d... They have billions of dollars in cash reserves, growing revenues & trade at decent price to earnings multiples. 4 of those stocks are in the energy/oil/gas pipeline industries and as oil prices will be going higher in 2011, they are worth looking into.

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