The All-Star Dividend Portfolio to Buy Today

In today's economy, many investors are increasingly turning to the stability and reliability of dividends.

This makes sense: Dividend-paying stocks not only tend to outperform nondividend-paying stocks over the long term -- by a whopping 10% to 4% margin, according to Ned Davis Research -- but they're also especially attractive during hard times. Noted investor and dividend expert Jeremy Siegel calls dividend stocks "bear market protectors and return accelerators." Their heightened yields tend to bolster portfolios, particularly during difficult times.

But not all dividend stocks are created equal. To help you find the best ideas, I compiled a diverse group of high-quality dividend payers. Read on to see their names, and discover what makes them so attractive right now.

Meet your all-star dividend portfolio
In selecting excellent dividend stocks, a few factors are critical. First and foremost, we want companies with attractive dividend yields. But it's also important to make sure that those dividends are both sustainable and have potential for growth by looking at whether the company can afford its payout, as well as examining their business fundamentals. I've done this for the dividend portfolio below.

Diversification is another important trait of a reliable dividend portfolio. Particularly during uncertain times, it's useful to make sure that you're not too exposed to any one sector, in case it suffers a targeted economic setback -- as financial-industry dividend payers did from 2008-2010. I made sure to choose stocks representing seven broad sector categories to help protect us further.

Lastly, it sure doesn't hurt when your portfolio enjoys the backing of other savvy investors with strong track records. To select a truly all-star dividend portfolio, I limited us to a select group of companies that not only earned the maximum five-star rating from our 180,000-member CAPS investing community, but have also caught the eye of the "All-Stars" ranked in CAPS' top 20%.

 Drumroll, please...

Company

All-Star Outperform/Underperform

Dividend Yield

Sector

El Paso Pipeline Partners (NYSE: EPB  ) 58 / 1 5.2% Energy and materials
Waste Management (NYSE: WM  ) 568/ 8 3.8% Industrials
Procter & Gamble (NYSE: PG  ) 1,794 / 22 3.3% Consumer goods
Abbott Labs (NYSE: ABT  ) 707 / 16 3.6% Healthcare
New York Community Bancorp (NYSE: NYB  ) 73 / 3 6.9% Financials
Telefonica (NYSE: TEF  ) 229 / 3 8.6% Telecommunications and information Technology
Southern Co. (NYSE: SO  ) 253 / 8 4.7% Utilities

Data from Motley Fool CAPS and Capital IQ, a division of Standard & Poor's.

Let's take a quick look at what makes each of these stocks reliable and attractive for dividend-hungry investors.

El Paso Pipeline Partners is a tax-advantaged master limited partnership that runs natural gas pipelines and a natural gas terminal. With net margins approaching 30%, it's a rather profitable business, and the company's long-dated contracts offer stability in addition to growth opportunities through expansion.

Procter & Gamble and Waste Management offer essential goods and services that generate reliable earnings even in a difficult economy. Similarly, Southern Co. is a steady, well-managed electric utility serving fast-growing regions in the Southeastern part of the country.

Abbott Labs focuses on a diverse group of specialized medicines and products, from diagnostic equipment to surgical devices to nutritional supplements and veterinary care. Last month, Abbott paid its 350th consecutive quarterly dividend since 1924. That payout also marked the company's 39th straight year of dividend increases.

New York Community Bancorp was strong enough to avoid taking any bailout funds, a remarkable feat for any company in the financial industry. Though the bank hasn't exactly overprovisioned, its loan loss rate is reasonably low and improving. At a time of turmoil for much of the industry, income growth has held up for this profitable bank that trades for just 1.1 times book value.

Spanish telephone giant Telefonica is such a high yielder in large part because of concerns about the Spanish economy. But the company only generates 30% of its revenue from Spain, as other European and fast-growth Latin American countries continue to make up an increasing share of its operations.

The bottom line
Right now, yields are attractive on dividend payers -- the same group of stocks research shows to be successful over both the long haul and unusual times. With some of the very best dividend stocks paying shareholders so much cash, now is a particularly great time to invest in a diverse group of reliable, high-quality dividend stocks.

If you want to have the income and stability dividend stocks can offer, consider the seven names I've selected above along with 13 more tickers from a free report from Motley Fool expert analysts called "13 High-Yielding Stocks to Buy Today," including one analyst Jim Royal called "the dividend play of a lifetime." Hundreds of thousands have requested access to this report and today I invite you to download it at no cost to you. To get instant access to the names of these 13 high yielders, simply click here -- it's free.

Ilan Moscovitz doesn't own shares of any companies mentioned. The Motley Fool owns shares of Telefonica, Abbott Laboratories, and Waste Management. Motley Fool newsletter services have recommended buying shares of Procter & Gamble, Waste Management, Southern, and Abbott Laboratories. 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 (10) | Recommend This Article (76)

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 July 25, 2011, at 4:13 PM, iamlard wrote:

    Very happy to see 4 (PG, ABT, TEF, and SO) of my holdings on your list!

  • Report this Comment On July 25, 2011, at 10:03 PM, GW1000 wrote:

    Good article! This is a pretty good list of dividend stocks. I own ABT, PG, SO, TEF, and WM. I am not very familiar with the other two but they seem solid also. However, being one of the All-Star CAPS investors mentioned in the article, I actually think that it could be more diverse by increasing the portfolio to 10 stocks. Three sectors not covered are Tech, Retail, and Industrial. I would add Intel (INTC), Wal-Mart (WMT) and 3M (MMM) to this list to round out the list to 10. I also think that there is no reason to limit your portfolio to 10 stocks because there are so many good ones such as McDonalds, Canadian National Railways, McGrath Rental, Watsco, Johnson & Johnson, Unilever, Bladex (BLX), Federated Investors (FII), Leggett & Platt, National Grid, Kinder Morgan Energy Partners, Hasbro, Phillip Morris International, Ambev (ABV), IBM, & Pepsico to name a few!

  • Report this Comment On July 26, 2011, at 7:40 PM, surfgeezer wrote:

    Agree with GMaster Not a bad list, but way to concentrated. I would add REIT's and far more country diversification. I have ARESF for both Canadian and REIT exposure. My favorite utility's are Brazilian CPL and AESAY. I would add Trusts. I use Canadian FRHLF and Gulf based MARPS. Not just income but a hedge against future oil inflation and US dollar.

  • Report this Comment On July 27, 2011, at 12:50 PM, Sunny7039 wrote:

    All of these stocks are worthy of being considered (and researched further), but I don't think anyone should be buying stocks for income "today." It is evident that interest rates on T bonds must go up this year -- and it has been evident at least since the Japanese earthquake, if not before. Take a look at Treasury yields and tell me who is going to buy all of this debt at these rates?

    http://www.treasury.gov/resource-center/data-chart-center/in...

    For most retail investors in search of solid income (most -- not all -- of course there are always plenty of exceptions), this is a time to WAIT.

  • Report this Comment On July 29, 2011, at 12:03 PM, latam wrote:

    The list includes some great and solid companies, great job as always.

    I just wonder why not to include SDT from the O&G sector? It is a solid company dedicated to produce gas from shale fiels in North America (domestic gas) and by design the company must distribute all its profits among the shareholders. Im invested in SDT and i would love to hear some comments from our family of experts

    Thank you kindly

  • Report this Comment On July 29, 2011, at 12:13 PM, gimponthego wrote:

    EVEP isn't a fluke or flash in the pan. In doing my DD several years ago..and keeping tabs on them..I'm constantly pleased with the results. I would most certainly add EVEP to the Energy Sector.

    And, above all, I'd wait until the Debt Debacle has at least found a semblance of direction before getting into Anything,

  • Report this Comment On July 29, 2011, at 1:28 PM, Mav23 wrote:

    Any suggestion to buy into a master limited partnership should include a warning about the complications MLP distributions create for your tax return if you hold the units (shares) in a taxable account. This results from the fact that MLP distributions typically include return of capital, which is not taxable but requires a basis adjustment, and passive losses, which cannot be deducted in the current year unless you have passive income (from a different source) against which to offset the loss or unless you have sold the units. For a more detailed discussion, refer to the Linn Energy website, which has an excellent tax FAQs page.

    My suggestion: Hold MLPs in your IRA or 401(k) and avoid these complications..

  • Report this Comment On July 31, 2011, at 8:54 AM, TimoDOZ wrote:

    MAy23 absolutely right. There are a dozen etfs, etns, and cefs you can invest in and not get caught dealing with K-1s at tax time. additionally because of UTBI box 20 K-1 issues these investments should mostly just be aqvoided in IRA investing. An older person who nhas lost their job and used a 72(t) duistribution plan to access their retirement with out pre 59 1/2 penalty could really get killed. K1 taxes from excess UTBI must be paid out of the IRA assets it is generated in. If you have a requirement for SEPPs then they/we the tax accountants and the IRA custodian are not sure if you can reduce an annual payment by the ammount of the tax due with out incurring a SEPP plan You could owe back taxes and penalties for the whole peroid you participated in a 72(t) distribution plan, for a change in the ammotization and deviating from equal payment with drawals.

  • Report this Comment On July 31, 2011, at 9:00 AM, TimoDOZ wrote:

    For right now MTP looks very interesting on valuation . MTP recently with a strong distribution increase over the last 2 quarters. EPB is their #9 holding at +4%.

  • Report this Comment On July 31, 2011, at 9:27 AM, TimoDOZ wrote:

    THANK YOU!!!! surfgeezer!! your remarks indicative as to why I am an occasional blogger here on Fool a reader with a grain of salt of their, links from other resources, and not a subscriber to any of their way too many but not one single comprehensive investment publications. Ther is something "aboot" canadian issuances and any foreign stock for that mattter that Fool finds reprehensible in covering and now (TEL) Telestra is offered I suppose as it sits on the NYSE. Sadly I was kicked out of BLIAF when it converted to a LLC. I amna\ged to get some but not all of those shares back when we were notified over a week later that because of the new tax laws in the US on cost basis they were liquidating the US unit/shareholders . TEL may be NYSE listed but it is "Junk" when compared to the total return of BLIAF over 1 year. Thank you for those other great ideas in Canadian symbols Northern REIT and RIOCAN REIT also look interesting. I recently in a swoon in the Loonie in mid June below 1.02 added CRWSF Chartwell Reit to my portfolio as well as added to my position MFCSF Medical Facilities, both in what has been the strong healthcare sector. MFCSF restructured as an LLC so no Cand with holding in my IRA. So far Chartwell a REIT which might be thought to with hold Cand with holding is not with holding either. So I am getting the whole 7% yield instead of the 5.9% I expected with just blowing off the 15% with holding in my IRA. MFCSF & ACAZF while essentially REIITs are structured as LLCs in Canada. Ideas that have kicked the Fool's disinterest in the butt. All stuff that I have in a REAL All Star Dividend Portfolio. I continue to add to my Canadian utes so what would have been 40% returns on a portfolio of those had I not continued to add is only "aboot" 32% and of course the +12% yield against cost basis'. MCQPF also looking very interesting at this time on valuation. They just launched a C$75 MM preferred offering. So some dilution and challenge to the dividend of course,but then just brought on line in the last couple weeks a new state of the art pivoting panels 20MW solar facility. Inmy opinion most of the prefered issuance proceeds will probably go to more non fossil fuel generating ca[acities. Speaking of preferreds how "boot" that CNPF sporting near 5.3% monthlies standing like Jackson and his Virginians in last weks 4.25% clobbreing of the Dow?

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1524322, ~/Articles/ArticleHandler.aspx, 9/2/2014 6:13:57 PM

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