34 Expert Analysts Uncover Outstanding Dividend Plays

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Editor's note: A previous version of this article reported that General Growth Properties pays a dividend. It does not currently do so. The Fool regrets the error.

In researching a series of articles, I've had the enviable opportunity to hold lengthy discussions with 34 of the Fool's analysts and advisors over the past two months, learning the companies they like and why. Stepping back and analyzing three notepads full of strategy, numbers, and logic, I've gleaned two key takeaways. Over the course of this article, I'll share those and the one company I plan to buy as a result of their insights.

The first overall lesson is that regardless of our analysts' stated preference, they are preternaturally drawn to companies that pay dividends. It's almost unconscious, but over the course of our casual conversations, well more than half of them mentioned -- unprompted -- the magic and allure of dividends. As a result, their suggestions of companies to watch are littered with companies that pay a handsome yield. They appreciate the idea that select businesses are willing to pay them to invest while also offering the opportunity for capital appreciation. And a strong and growing dividend also is a leading indicator of a company's overall health.

As astute Fool analyst Dan Caplinger wrote, "Dividend payments do signal that a company believes its business is sustainable over the long term. If a company is able to pay money back to shareholder in the form of a dividend, it must be generating enough free cash flow to finance the payouts. And if the company regularly pays dividends, those cash flows must be ongoing and dependable." He points out that a history of dividend payments doesn't guarantee the long-term success of a business -- especially if a company is financing its dividends not from free cash flow, but rather by raising capital through taking on debt, selling assets, or diluting shares. "You shouldn't just assume that any stock that pays a dividend is destined for greatness. But on the other hand, you shouldn't discount dividends entirely, either. Given that dividend-paying stocks have historically outperformed stocks that don't make payouts by a substantial margin, it's clear that for every questionable dividend stock, there are many others that have the goods."

Here are two strong, dividend-paying companies that our top investors think merit a position on your watchlist, if not your portfolio.

Company to Watch

Annual Dividend (Yield)

Analyst/Advisor (and link to the original article)

Intel (Nasdaq: INTC  ) 0.63 (3.00%) Head of Analyst Development Buck Hartzell and Million Dollar Portfolio associate advisor David Meier
Philip Morris International (NYSE: PM  ) 2.56 (4.30%) TMF analyst Dan Dzombak

Our second lesson
The second life-changing investing lesson actually comes not from our analysts, but from loyal Fool Steve Beckmeier. In one of my recent articles, I wrote that an analyst I had interviewed was waiting for Apple (Nasdaq: AAPL  ) to pull back to $300 a share with the expectation that they could easily reach $400 if its deal with Verizon goes through. Steve sent me an email that said in part:

"The Fool is always talking about not timing the market but I also always see comments about waiting for a better price. Isn't that kinda the same thing? Why take the chance of Apple going down $20 if you think it's going to go up $80 from where it is today? Why not just buy at today's price?"

My initial response was that either:

  1. At a $100 spread between his hoped-for purchase price and his estimate of where it could go, he has an ample margin of safety, but with a smaller spread his money can earn more with a different investment;
  2. He's established $300 as a psychological anchor, a magic number that signals a buy; or
  3. It's somewhere in between.

Steve replied quickly. "I subscribe to a few Fool newsletters and have had great success, but I'm always confused when some of the recommendations say to be sure to use a limit order because of the volatility of the stock. Again, this seems similar to trying to time the stock instead of just buying a good stock at a good price. I was lucky enough to get in to Netflix (Nasdaq: NFLX  ) at $11 and have lots of friends that waited for pullbacks at $40... $50... $75... $125… and never ended up getting in."

And the stock I'm going to buy
That simple email chat, combined with the wisdom of nearly three dozen analysts, has convinced me to make a purchase. The company was high on the watchlist of both Motley Fool Options advisor Jim Gillies and Buck Hartzell, the man who is responsible for the continued development of our analysts. It's the king of its segment and its shares were recently knocked down on news that our analysts feel was overblown. And the company has decided it will pay its first dividend by next July, the end of its current fiscal year. My instinct (as always) was to put it on my watchlist and wait for a pullback, confident that I could make a couple extra bucks when the market puts it on sale.

But Steve has convinced me that if I believe in a company, believe it will pay me to invest with a growing dividend, and believe that it will substantially outperform the market for years if not decades, I should shut up and make the purchase. Therefore, as soon as Motley Fool trading guidelines allow, I'm going to buy shares of network equipment giant Cisco Systems (Nasdaq: CSCO  ) . It's not paying dividends now, but it plans to soon -- and the shares are a bargain I simply can't pass up right now.

If you're looking for dividend-paying stocks that you can believe in, the Fool's recent report on 13 high-yield companies is a great place to start. To get instant access to this report and a raft of outstanding dividend payers, click here -- it's free.

Roger Friedman doesn't own shares of any companies mentioned, but they're all now on his watchlist. Apple and Netflix are Motley Fool Stock Advisorchoices. Philip Morris International is a Motley Fool Global Gainsselection. Motley Fool Options has recommended buying calls on Intel, which is a Motley Fool Inside Value recommendation. The Fool has created a bull call spread position on Cisco System; owns shares of and has bought calls on Intel; and owns shares of Apple and Philip Morris International. Motley Fool Alpha owns shares of Cisco. 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 (25) | Recommend This Article (71)

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 December 27, 2010, at 6:02 PM, screamin4 wrote:

    U'r making a move I don't understand; Cisco has been 'range-bound' for 10yrs. Why is it suddenly a bargain?

  • Report this Comment On December 27, 2010, at 6:19 PM, TMFSunshine wrote:

    screamin, you can find more of the rationale here:

  • Report this Comment On December 27, 2010, at 7:18 PM, sigheide007 wrote:

    I held Cisco for more than 3 years and ended

    up loosing 30%.

    Cisco is a dead stock!

  • Report this Comment On December 27, 2010, at 10:12 PM, katelf wrote:

    Relative newbie here. I've been reading up on dividend yields, and in TMF's definition it says "However, note that the yield being paid at the time you purchase the stock is what your investment will earn from dividends as long as you hold the stock, regardless of what the share price does. "


    This seems to say that once you buy a stock, you will receive the same dividend until you sell it again. I have not heard of this anywhere else, and the strategy of buying a stock that will eventually have a dividend (or has a dividend that goes up every year) seems to contradict this. Can someone please explain?

    Many thanks.

  • Report this Comment On December 27, 2010, at 10:17 PM, goalie37 wrote:

    Any way to post all 34 pics?

  • Report this Comment On December 28, 2010, at 9:10 AM, TMFSunshine wrote:

    goalie -- if you click on More Articles at the top of this one, next to my byline, you'll get a list of all the pieces I've written. The vast majority of the recent ones are summaries of those interviews.

  • Report this Comment On December 28, 2010, at 11:44 AM, TMFBreakerRob wrote:

    @katelf: Thanks for pointing out the error in the Wiki. Your understanding is correct. A stock's yield is the payout divided by the current price.

    And yeah, we all love rising dividends (provided they are sustainable). :)

  • Report this Comment On December 28, 2010, at 11:51 AM, WalterMiddy wrote:


    I think this example might explain: If you buy a share at $10 and it pays a $.30 dividend, your yield on your $10 investment is 3%. If the dividend stays at $.30, no matter how high the stock goes, YOUR yield is 3%.

    If I buy a share at $15, and it's still paying a $.30 dividend, my yield on MY investment is 1.5%.

    This doesn't mean that dividends won't be raised (or lowered). But, if the dividend goes up to $.40, then the new yield on YOUR initial investment is 4%; on mine, 2%.

    The yield percentages will not be so cut and dried if dividends are reinvested. If the dividends are reinvested at a higher share price, the same $.30 dividend will constitute a lower yield on those reinvested shares...I think.

    Perhaps someone will correct me if my explanation is wrong.

  • Report this Comment On December 28, 2010, at 11:59 AM, TMFSunshine wrote:

    nathan, would you then say that Buffett's not an expert either? After all, he's still working.

  • Report this Comment On December 28, 2010, at 11:59 AM, WalterMiddy wrote:


    In looking at my answer, I may be using the term "yield" incorrectly. It's probably more accurate to say the "return" on your investment is 3%. The yield on the share relates, I think, to the stock's price.

    So, if the dividend stays the same, the yield fluctuates with price of the stock. But the return on your investment should stay the same.

    Again, I'm hoping someone better versed in the terminology chimes in.

  • Report this Comment On December 28, 2010, at 12:45 PM, katelf wrote:

    Ok, thanks for clearing that up. Without going into the finer points, I get that you're not locked in forever to the yield from whatever the dividend was when you bought; in other words, "dividends going up - good!"

  • Report this Comment On December 28, 2010, at 2:24 PM, Superdrol wrote:

    I bought a lot cisco last week around $19.50/share before the front page article in Barrons. I was expecting it to be dead money for 6 months but now I'm excited because everyone is pumping it.

    Everyone should keep buying cisco and pumping the stock for me to unload it soon.

  • Report this Comment On December 28, 2010, at 3:31 PM, Merton123 wrote:

    Roger Friedman article about dividend paying stocks is excellent. The majority of investors will not be able to buy the entire company as a whole to gain its earning stream like Warren Buffet. There are two ways to make money from buying a stock (its dividend) and (price appreciation). The price appreciation is iffy - especially in small cap stocks. The dividend is money in the pocket. Benjamin Graham uses an example that every company within a portfolio total return should exceed a high yield corporate bond. And the mutual fund company that follows this advice - Tweedy Browne has over almost a century was called a "super investor" by Warren Buffet himself in his appendix written for "The Intelligent Investor" by Benjamin Graham. I don't what stronger recommendation for dividend based investing could be?

  • Report this Comment On December 28, 2010, at 3:38 PM, EnigmaDude wrote:

    I added a few shares of INTC in my IRA today. The recent history suggests that they intend to keep raising the dividend, and the stock is fairly valued and should appreciate over the next 10-15 years or so, which is my time horizon for that investment.

    Cisco looks like a good value too, but I would rather wait until they actually start paying out a dividend before I invest in them.

  • Report this Comment On December 28, 2010, at 3:59 PM, PeyDaFool wrote:

    "Everyone should keep buying cisco and pumping the stock for me to unload it soon."

    I had a good laugh after reading this one. At least you're honest!

  • Report this Comment On December 28, 2010, at 4:39 PM, fendelfar wrote:

    Does Motleyfool ever get involved in an OTC

    stock? I have one for years that has been paying

    great dividends and great growth as well.

  • Report this Comment On December 28, 2010, at 4:50 PM, Starfirenv wrote:

    So you "analysts" use Wiki to understand Divs? Not surprising after reading your (TMF) "Top anylists and top picks". Wow, 1 of five outperformed (by a 10th of a %). Wouldn't you have done better statistically if you had 5 monkeys throwing darts? No thanks

  • Report this Comment On December 28, 2010, at 5:15 PM, TMFSunshine wrote:

    Starfire, it seems you've misunderstood. Our team here created the wiki that katelf was using to try to expand his/her investing knowledge. Our community then helped katelf on a confusing point because we are, generally speaking, a respectful community made up of everyone from newbies to seasoned investors. Hope that helps clear up your confusion.

  • Report this Comment On December 28, 2010, at 6:28 PM, Starfirenv wrote:

    Thanks for the respose Sunshine. Now I see that katelf was relying on bad info provided by TMF.

    I have two questions-

    1. Shouldn't 5 monkeys throwing dart statistically have done better than your best pickers best picks?

    2. Why on Earth would you publish this. You guys are losing cred at breakneck speed. Why hasten it?

  • Report this Comment On December 28, 2010, at 7:17 PM, TMFSunshine wrote:

    Hi Starfire -

    Your answers:

    1. I suppose you can cherry-pick the results from any investor and find times of underperformance. I would direct you to our premium services scorecard (you can find it at for a longer-term view of our performance.

    2. We publish all comments, even those critical of the Fool and its writers and analysts.

  • Report this Comment On December 28, 2010, at 10:28 PM, PeyDaFool wrote:


    The MotleyFool writer roster is filled with many authors with different points of view. Some are more conservative, some prefer companies with ethical CEOs and others are looking at long term economic trends. They often don't agree with each other.

    It's not fair to say they're "losing cred at breakneck speed."

  • Report this Comment On December 29, 2010, at 2:43 AM, whyaduck1128 wrote:


    You said, "If I buy a share at $15, and it's still paying a $.30 dividend, my yield on MY investment is 1.5%.

    This doesn't mean that dividends won't be raised (or lowered). But, if the dividend goes up to $.40, then the new yield on YOUR initial investment is 4%; on mine, 2%."

    Your percentages on your investments are wrong. a $.30 dividend on $15 is 2%, not 1.5%, and your yield at $.40 is 2.67%, not 2%.

    You also said, "The yield percentages will not be so cut and dried if dividends are reinvested. If the dividends are reinvested at a higher share price, the same $.30 dividend will constitute a lower yield on those reinvested shares...I think."

    If you're reinvesting dividends, divide the total dividend received each quarter by the INITIAL investment and multiply by 4 to get the yield. So if the dividend per share remains the same, your yield goes up.

    At least, that's how I figure it.

  • Report this Comment On December 31, 2010, at 12:31 PM, LogNormal wrote:

    Mr, Katelf:

    Although I agree with you and others that dividend-paying stocks are a good move, keep one thing in mind; the dividend can be reduced or even eliminated by a simple majority vote of the Directors. There is no substitute for due diligence, as many people here will tell you. Depending on your time frame, you may want to consider preferred stock or discounted bonds of companies with strong balance sheets and lots of free cash flow.

    Just my $0.02.

  • Report this Comment On December 31, 2010, at 8:48 PM, LALIBERTEW wrote:



  • Report this Comment On January 04, 2011, at 11:07 AM, BlackOps wrote:

    So what you're saying is that I should look into stocks before buying them.


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