Quiz time, sports fans: What did the New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s have in common? (And exactly how can this help you with your portfolio?)
It wasn't just that they had some of the best individual players of the time -- Yogi Berra, Michael Jordan, and Emmitt Smith, respectively -- although that certainly helped. And it wasn't just that they were able to bring home world championship trophies on a regular basis. It was simply that their organizations and performances were consistently excellent.
Consistent excellence is rare anywhere, but imagine seeing it in your portfolio. Impossible? Not at all. Because that's what carefully chosen dividend-paying stocks can offer.
Be the next investing dynasty
Finding these long-haul outperformers can help you build your fortune, as studies from investing gurus such as Jeremy Siegel have shown time and time again. Finding them for you is precisely what we do at our Motley Fool Income Investor service.
France Telecom (NYSE:FTE), for example, is up nearly 30% since February 2006, while it has rewarded shareholders with a 5.31% yield. Then there's Bank of America (NYSE:BAC), which has returned more than 31% since November 2005, on top of a 4.20% yield. And while both stocks happen to be Income Investor recommendations, you don't need to be a subscriber to get these great gains.
Identify new talent
With that last thought in mind, I'd like to introduce you to our new community intelligence database, Motley Fool CAPS. There, savvy investors help one another identify stocks that can create consistent and substantial growth for any type of investor. In fact, thousands of strategies, plays, and hunches are allowed to vie for supremacy. And, just as in professional sports, the cream inevitably rises to (and stays at) the top.
So what are the best dividend-paying stocks around, according to CAPS? Here are a few dividend picks with five-star ratings:
|
Company |
Yield |
|---|---|
|
NorthStar Realty Finance (NYSE:NRF) |
8.42% |
|
Valero LP (NYSE:VLI) |
6.62% |
|
LAN Airlines (NYSE:LFL) |
3.88% |
|
21st Century Holding Company (NASDAQ:TCHC) |
3.43% |
|
Aluminum Corp. of China (NYSE:ACH) |
5.35% |
I encourage you to join CAPS to learn more about why investors are so bullish on these companies, and perhaps to add your own thoughts to the system. I'll get you started with some thoughts about one company here that could merit some extra attention: 21st Century Holding Company. This Florida-based insurer hit some tough times during the 2004-2005 and 2005-2006 hurricane seasons, but seems to have (pun alert) weathered the storm. Since then, a light 2006-2007 storm season promises to push down the rates the company has to pay for its reinsurance.
For the first nine months of 2006, 21st Century's revenue was up 17%, while net income nearly doubled. Over the last year, shareholders have been treated to an 18% gain in share price, as well as a 50% boost in the dividend -- and that's the second consecutive year the company has boosted the dividend by that percentage. There's only one Wall Street analyst who currently follows 21st Century, but there have been 167 CAPS players who have rated the stock, 163 of whom believe that 21st Century will outperform the S&P 500. Most of the CAPS players who have picked 21st Century see it as a strong company with a very low price tag. CAPS All Star Patrick6k has this to say:
"21st Century Holding Company is [a] solid company with good management selling at a good discount to the overall market at the moment. They have low debt, good cash flow, good inside ownership, and nice margins all around."
The great thing about being a dividend investor is that your portfolio won't be shocked by the market's most volatile stocks. Instead, it will aim to outperform the market on the back of dependable, consistent cash flows.
So to conclude this extended sports metaphor, allow me to suggest that dividend stocks will help you turn your portfolio into the dependable New York Yankees, rather than the flash-in-the-pan Florida Marlins. And if you hate the Yankees, it's probably because they're so darn good, so darn often.
More interesting income Foolishness:
- The Role of Intuition in Trading
- Vague Reminiscences of a Stock Operator
- Foolish Book Review: "Confessions of a Street Addict"
Yankees fan and Fool contributor Matt Koppenheffer hopes the Yanks can continue (regain?) their legendary excellence, and has his fingers crossed that the Cowboys never will get back to the top again. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is always on the winning team.
