As every good Fool knows, when you buy shares of dividend-paying companies, you're basically getting paid to invest. Make no mistake: Total return is the number to watch with any investment. With dividend-payers, though, you're getting a twofer: the potential for stock-price appreciation and a stream of income.
How sweet it is
That's a sweet combination, one that gets sweeter still when you can snap up picks with fat payouts on the cheap. On that front, Lloyds TSB Group
But while those companies currently trade at price-to-earnings discounts relative to the broader market and average industry rival, Lloyds sports a similarly discounted profile and the richest payout of them all. Indeed, that figure currently clocks in at around 6.1%. And while investors seem to have taken notice and bid Lloyds' stock price up nicely thus far in 2006, it still remains some 15% below its five-year high.
Not that that makes investing in Lloyds a no-brainer, of course. Rather, for investors with a hankering for discounted (and juicy) payouts, this company is good fodder for the further-research file.
A Ford in your future?
I think that's also true of Ford
Unlike those companies, however, Ford boasts significant free cash flow (FCF): It generated in excess of $6 billion of the stuff in 2005, and today it offers a dividend yield of more than 5%.
As with Lloyds, income-hungry investors will want to look carefully before they leap here. After all, the U.S. auto industry has, um, a long road trip ahead on the way back to fiscal health. Ford's payout does provide an intriguing risk premium, though, particularly given the firm's FCF figures.
The Foolish bottom line
If the foregoing has piqued your income interest, the Fool has a newsletter service you might be interested in, too. Each month, Income Investor uncovers a pair of high-yielders that analyst Mathew Emmert thinks are among the market's best bets. A 30-day guest pass to the newsletter is yours free and provides access to all Income Investor back issues and its members-only discussion boards, too.
Those boards, by the way, are a terrific forum for winnowing your further-research list with likeminded investors. Indeed, paired with the newsletter's monthly insights, they make Income Investor -- like a dividend-paying stock -- a compelling twofer. Click here to take the service for a risk-free spin.
Shannon Zimmerman doesn't own any of the securities listed. Lloyds is an Inside Value recommendation. JPMorgan is an Income Investor pick. The Fool is investors writing for investors, and you can read all about our disclosure policy by clicking right here.
