2 Dividend Stocks I Believe Will Beat the Market

Have you taken a look at the Dow Jones Industrial Average (INDEX: ^DJI) lately? If so, you've probably noticed the neck-breaking up-and-down motion it's taken over the past few months. And if you're like many investors, you're probably wondering whether there are any "safe" bets out there. Well, read on, Fool, because here are two stocks that are almost guaranteed to beat the market in the long run.

Keeps gettin' better
August was not a pretty month for stocks. Debt crisis, European crisis, fear of recession … stocks didn't stand a chance. Even soda giant Coca-Cola (NYSE: KO  ) took a hit: On Aug. 10, its stock traded as low as $63.96 a share.

However, Coke is one stable company, as its quarterly results prove.

Coca-Cola Quarterly Income Statement

Q2 2010

Q2 2011

Revenue $8,674 $12,737
Net income $2,369 $2,797
Diluted EPS $1.02  $1.20

Source: Dollar figures in millions, except per-share data.
 Since the same time last year, Coke has increased its revenue, net income, and its earnings per share. And with a 2.8% dividend yield at a payout ratio of 34%, Coke is primed to continue offering shareholders value, while paying a healthy dividend, for years to come.

The little chip that could
Wondering what technology company dominates core processors? Look no further than Intel (Nasdaq: INTC  ) . Although Intel took a slight tumble with the rest of the stock world, it's by no means headed for disaster. If anything, Intel's recent tumble is signaling that the stock is currently on sale, and now is the time to get in.

Just check out Intel's quarterly results:

Intel Corp Quarterly Income Statement

Q2 2010 

Q2 2011 

Revenue $10,765 $13,032
Net income $2,887 $2,954
Diluted EPS  $0.51  $0.54

Source: Dollar figures in millions, except per-share data.Year over year, Intel has grown its revenue, net income, and earnings per share. Moreover, right now, it's trading around $20 per share, or a little more than 9.5 times earnings. That's a great price for the technology giant, and it's well below its historical earnings multiple. If that's not enough to interest you, maybe its 3.9% dividend yield will, especially when you compare that number with Microsoft's (Nasdaq: MSFT) 3.2%, Texas Instruments' (NYSE: TXN) 2.6%, and Advanced Micro Devices' (NYSE: AMD) zilch. And with a payout ratio of 31%, Intel's dividend yield looks sustainable, making this a great company for the long run.

Sweet relief
Yes, the market looks like a yo-yo, and it's not showing signs of stopping anytime soon. That's why now is the time to invest for the long run. These two companies represent solid, sustainable growth along with dividend payouts, and even though there will probably be stock fluctuations in the future, these two companies are primed to offer great returns in the long run.

Looking for more great stock ideas? The Motley Fool's brand new free report "The Motley Fool's Top Stock for 2011," reveals a little company that is set to profit from the broadband Internet expansion. Access your free report today!

Fool contributor Katie Spence loves seeing returns from owning shares of Coca-Cola. She owns no shares of any other company mentioned above. If you'd like to see what else she’s interested in, you can follow her on Twitter, @TMFKSpence.

The Motley Fool owns shares of Microsoft, Texas Instruments, Intel, and Coca-Cola and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Coca-Cola, Intel, and Microsoft, creating a diagonal call position in Intel, and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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  • Report this Comment On October 06, 2011, at 10:12 AM, sept2749 wrote:

    The stocks you recommend are great and I own them and love them. In future columns I'd like to see what you think would be good entry points for stocks recommended. It would be a great help. Although the market is like a yo-yo it is still a great idea to know what a stock is really worth sans emotions like fear and dread! Looking forward to seeing some recommended entry points especially when the market behaves like it is. This market gives us a good chance of buying some stocks on the cheap which is the whole idea.

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