Dividend-paying stocks offer the best of both worlds: regular and recurring income, plus the opportunity for capital gains over time. Historical studies show that, over long periods of time, investors who buy high-yielding stocks tend to outperform those who buy the market's lowest-yielding stocks, adding to the case for investing in a diversified portfolio of dividend stocks.

Below, three Fools lay out the case for buying Nucor Corporation (NYSE:NUE), Oaktree Capital Group (NYSE:OAK), and Union Pacific Corp. (NYSE:UNP) for high yields that offer the potential to grow over time.

A bargain price for a dividend stalwart

Jason Hall (Nucor Corporation): Few steelmakers are even worth considering as long-term investments, and only Nucor has a proven track record of decades-long dividend growth, having increased its base dividend every year since 1973. While the increases in recent years have been modest, Nucor is an excellent dividend stock to buy today.

Nucor's earnings for the first half of the year are the highest they've been in eight years, while the market has pushed shares down 13% from the 2017 high. Why is the market selling Nucor? In short, because of fears that imports will continue to take market share from domestic producers and drive down prices. 

While there is some risk of this happening -- Nucor CEO John Ferriola said after the most recent earnings report that imports were spiking again after falling for the past year. Nucor has proven capable of navigating almost any environment profitably. Furthermore, the Trump Administration has made it clear that it will continue efforts of the Obama administration to combat the dumping of illegally subsidized foreign steel, which has harmed American steelmakers. 

Lastly, Nucor is cheap, trading for less than 16 times trailing earnings and 14 times forward earnings. It has been nearly a decade since Nucor shares consistently traded so cheaply. And Nucor today is a bigger, more capable steelmaker than it was a decade ago.

As steel demand continues to remain strong and even grow, Nucor is well-positioned to profit. Add a 2.7% yield on a dividend that gets increased yearly like clockwork, and shrewd investors looking for value could do well to buy Nucor. 

Photo of dollar bills in a jar on blue background

Image source: Getty Images.

A high yield that adds diversity to your portfolio

Jordan Wathen (Oaktree Capital Group): It's my view that shrewd investors should look to dividend-paying companies whose prospects look better as the markets turn for the worse. Few companies exemplify this trait quite like Oaktree Capital Group (NYSE:OAK), a distressed-debt investment manager that has roughly $21.5 billion of client capital on standby, waiting for an opportunity to pick up investments at depressed prices.

Oaktree is more than just a distressed debt manager. It also owns a valuable stake in DoubleLine, a premier bond-fund manager, in addition to its own open-end and closed-end funds for smaller investors. Importantly, unlike many other alternative-asset managers, Oaktree is a lean operator and produces profits from management fees alone. Incentive fees earned for good performance are merely the icing on the cake. That stability is important, particularly in markets like we have today, where opportunities to put capital to work in attractive investments are few and far between.

Shares yield about 7% based on distributions declared over the last 12 months. Investors have visibility into the company's ability to pay large dividends going forward. Oaktree has "accrued incentive fees" tallying to $5.55 per share. The company has earned these accrued fees and will receive them in cash as its funds liquidate their winning investments and pay cash fees to Oaktree for good performance, fueling its future cash payouts.

There are few high-yielding stocks whose prospects get better as stock prices drop. For this reason, I think Oaktree is an attractive stock to add to any income portfolio.

Railroads aren't going anywhere

Daniel Miller (Union Pacific Corp.): If you're a shrewd investor, you're probably looking for a stock that offers a long-term competitive advantage, along with a dividend to guarantee some level of income. Union Pacific Corp. offers both.

While there are plenty of ways for businesses to transport goods -- via ships, aircraft, or trucks -- railroads are the lowest-cost option, by far, if no waterways connect the two destinations. Thanks to that cost advantage and the fact that Union Pacific has massive scale, it has long-term advantages over many peers and alternative methods of transportation.

One factor a shrewd investor ought to love is that the company continues to cut costs and improve its operations. In fact, during its recent second quarter, the company improved its operating ratio by an impressive 340 basis points to a second-quarter record 61.8%. The lower the operating ratio the better, and its trend is very positive: In 2016, the company's operating ratio was 63.5% and its 2019 target is roughly 60% before eventually aiming for 55% over the long haul.

Investors can sleep at night owning shares of Union Pacific thanks to its track record of returning value to shareholders through share buybacks and increasing dividends. Here's a look at how its shares outstanding have decreased at the same time its dividend has trekked higher.

UNP Chart

UNP data by YCharts.

Union Pacific has managed to pay dividends through good times and bad for 118 consecutive years -- a track record that few can compare to. Its $0.605 dividend per share equates to a 2.3% yield and helps reduce the overall risk of owning shares.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.