The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s had 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.
California Water Service Group, for example, has beaten the S&P 500 by almost 80% since September 2003, and it currently is rewarding investors with a 3% yield. Or consider Unilever (NYSE: UL), which has topped the S&P by 39% since February 2005, atop a current 5.3% 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 120,000-plus members of our CAPS community:
|
Company
|
Yield
|
CAPS Rating (out of 5)
|
|
AT&T (NYSE: T)
|
6.5%
|
****
|
|
IBM (NYSE: IBM)
|
2.8%
|
****
|
|
Halliburton (NYSE: HAL)
|
2.7%
|
****
|
|
CapitalSource (NYSE: CSE)
|
6.3%
|
****
|
|
Yum! Brands (NYSE: YUM)
|
3.4%
|
*****
|
Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of Nov. 20.
Any one of these quality companies would add some dividend excellence to your portfolio, but let's take a closer look at why CAPS members think that IBM is worth a hard look.
foolfriend100 weighs in
With whippersnappers like Google (Nasdaq: GOOG) making the waves in the technology sector these days, it may seem funny to think of IBM as a Wall Street darling on the cutting edge of technology. But just because IBM is no longer a de facto holding in every fund manager’s portfolio doesn't mean that it couldn't be a nice addition to yours.
On CAPS, foolfriend100 finds himself among nearly 2,700 CAPS members who have rated IBM an outperformer. Our CAPS player backed up the thumbs-up rating by saying:
IBM just released a new mainframe and well benefit from the upgrade cycle. IBM is the biggest integrator of SAP. IBM Global Services will benefit from the economic slowdown by helping companies integrate computer systems, a service needed when companies merge/consolidate or divest/sell off units.
For anyone who hasn't tuned in to the IBM story for awhile, it may seem silly to think that a hardware company would do well during an economic downturn. However, today the bulk of IBM's business is offering technology and business services to its clients -- offerings that businesses around the world could be looking to tap now in an effort to slim down operations and become more efficient. In fact, the largest of IBM's technology service offerings is strategic outsourcing, an area that has been growing in recent quarters and should see continued strength as businesses scramble to cut costs.
And though it's difficult to take a walk on Wall Street these days without tripping over a cheap stock, IBM certainly falls into that category. An earnings multiple of just over 8 times its expected 2008 earnings seems like a steal for a business with this kind of brand and global footprint. Even better, the stock’s 45% drop from its 52-week high has brought the dividend yield up, so you also get a decent payout while you wait for the market to come back to its senses.
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.
More CAPS Foolishness:
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