3 Dividend Stocks for Your Watchlist

Most investors don't keep tabs on their companies' fundamental values. That's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home run stocks that provide the market's best returns.

We can help you keep tabs on your companies with MyWatchlist.com, our free, personalized stock-tracking service. Here are three dividend stocks for your watchlist.

1. Mesabi Trust (NYSE: MSB  )
Similar to Great Northern Iron Ore (NYSE: GNI  ) , Mesabi Trust is a royalty trust with large holdings of iron ore and is a great way to gain direct exposure to the metal. The ore is mined by Northshore Mining, a subsidiary of Cliffs Natural Resources (NYSE: CLF  ) . Shares took a beating the past few months, after the company announced that its first-quarter distribution would be more than 50% lower than last year's and more than a 90% down from the previous quarter's.

However, the drop in the dividend should not have come as a surprise to anyone who has researched the stock. There's only one way to get the ore out of the area, and that's the St. Lawrence River. Every year, the river freezes over, stopping shipments from the area, so the trust makes money only on what it can get out before the river closes. As such, the Q1 distribution is always very small. The overreaction to the dividend drop is a great opportunity for investors, especially if you believe that iron ore is poised to continue its bull run.

2. CAPS' Weekly Top Stock Idea: Silver Wheaton (NYSE: SLW  )
Each week, I cull a top stock idea from the pitches on CAPS, The Motley Fool's 170,000-member free investing community. Silver Wheaton, a pick from December, caught my eye, since its shares have fallen over the past three months. Silver Wheaton, along with fellow silver companies Hecla Mining (NYSE: HL  ) and Silvercorp Metals (NYSE: SVM  ) , are focused on the production of silver. While the company doesn't pay a large dividend, $0.12 for a 0.4% yield, the fact that a silver company is confident enough to pay a dividend says loads about its prospects.

With long-term contracts for silver at $4 an ounce, Silver Wheaton is profiting wildly from the rise in silver prices over the past year. Former CEO Peter Barnes said before he left, "I don't see any reason why in the future we couldn't be paying out 40%, 50%, or 60% of our cash flow every year in dividends." As the company's current free cash flow payout ratio is just 9.5%, that would be a big increase. See the pitch selected for CAPS' weekly top stock idea. If you want to follow my weekly picks, you can subscribe to the series' RSS feed or follow it on Twitter.

3. Newmont Mining (NYSE: NEM  )
Newmont Mining is a gold miner with an innovative dividend policy. This past year, the miner started paying a regular quarterly dividend, which was initially $0.15 per share. It subsequently raised its dividend to $0.20 and instituted a dividend policy of increasing its quarterly dividend $0.05 for each $100 per ounce rise in the average realized gold sales price over the preceding quarter. The second-quarter dividend was based on the first quarter's average gold sales price of $1,382 an ounce (or between $1,300 and $1,399). If gold prices continue rising, Newmont shareholders will be duly rewarded.  

My Foolish bottom line
Consider these three stocks along with the 13 names in a free report from The Motley Fool's expert analysts, "13 High-Yielding Stocks to Buy Today." A senior retail analyst dubbed one of the picks 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 you. Get instant access to the names of these 13 high-yielders -- it's free.

Follow Dan Dzombak on his Twitter account, @DanDzombak, to keep up with his musings and find out what articles he finds interesting.

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Read/Post Comments (3) | Recommend This Article (11)

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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 July 07, 2011, at 10:52 PM, kurtdabear wrote:

    While your analysis of MSB's situation is essentially correct, your geography needs a refresher course. Ore from Mesabi (in Minn.) goes across Lake Superior, down Lake Huron, through Lake St. Clair and the Detroit River to Lake Erie and across to Cleveland, which is where "Cliffs," once known as "Cleveland Cliffs," is headquartered. That being said, the Great Lakes and the Detroit River do generally all freeze up every winter, same as the St. Lawrence, but the St. Lawrence is on the other side of Lake Ontario, the easternmost of the Great Lakes, and would only affect ore bound for Europe and points east. (The legendary Edmund Fitzgerald was hauling Mesabi Range ore when she sank during a November 1975 gale in Lake Superior.)

  • Report this Comment On July 08, 2011, at 10:07 AM, sodhead wrote:

    how does .20 dividend on $34 stock convert to a 15% return. Yahoo has it listed at .60% return?

  • Report this Comment On July 11, 2011, at 7:01 PM, ousaou wrote:

    True, the St Laurent river freezes in the winter, but this is not the reason trading is stopped. The iron ore is shipped from Silver Bay located in Lake Superior. By enlarge the from Silver Bay MSB iron ore is for clients on the shores of Lake Huron or Michigan. To access these ports you have to transit through the Soo Lock near Sault St Mary. This lock is closed every year from 15 January through 15 March, 1. the water is frozen 2. This time is used for the lock maintenance. Little tonnage of MSB iron ore goes through the St Laurent. which in all cases has limited bulk carrier draft which limit the transit tonnage to 33,400 tons per ship. The carriers tonnage on lake Huron and Michigan is 64,300 tons.

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