"You can't have your cake and eat it too." I never understood that particular proverb. The whole point in having a cake in the first place is to eat it. The same is true for investing in dividend-paying stocks. Sure, you want the dividends, but you also want the share price to increase over the long term.

Growth and income
Fortunately, you can find solid dividend payers that also promise substantial capital appreciation. In a recent article, James Early, lead analyst for Motley Fool Income Investor, showed that companies with the highest dividend payouts also delivered the highest earnings growth. This surprising phenomenon may happen because dividends tend to indicate financial health. And maintaining a dividend payment may require managers to allocate capital more efficiently.

Dividend stocks with solid growth rates should play a part in most investors' portfolios. The dividends will reduce volatility and provide a steady stream of cash regardless of the direction of the overall market. And increasing earnings growth should translate into higher stock returns, which will boost the overall return of your portfolio.

Seven remarkable stocks
With these insights in mind, I screened for dividend payers with expected annual growth rates of more than 15% over the next five years. I then included only those stocks that have received a high rating from our Motley Fool CAPS investment research service. Here are the results:

Company

Yield

CAPS Rating
(5 stars max)

Alcon (NYSE:ACL)

1.1%

*****

CNOOC (NYSE:CEO)

3.6%

****

Copano Energy (NASDAQ:CPNO)

4.9%

*****

Corporate Executive Board (NASDAQ:EXBD)

2.1%

*****

Greif (NYSE:GEF)

1.3%

*****

LAN Airlines (NYSE:LFL)

4.0%

****

Precision Drilling Trust (NYSE:PDS)

9.0%

*****

Data from Yahoo! Finance and M otley Fool CAPS.

Each of these companies provides a nice combination of income and growth potential. These stocks are only offered up as ideas for future research, however, and do not represent official recommendations.

It's safe to say that most of these companies are not household names, though folks with contact lenses might recognize Alcon. CNOOC, Copano Energy, and Precision Drilling Trust operate in the energy sector, where solid long-term demand for oil and gas present considerable growth opportunities.

Corporate Executive Board, which provides research and educational materials to major corporations, is viewed very favorably by some of our top investors in CAPS. A sharp decline in its share price after recent guidance might make this one an interesting idea at the current price.

More of these
If you are looking for additional research on dividend payers that offer solid growth rates, consider a free 30-day trial to Motley Fool Income Investor. James Early and his team are currently beating the market by nearly 10 percentage points over a three and a half year period, and their picks offer a 4% yield on average to boot. Click here if you'd like to eat that cake after all.

John Reeves does not own shares of any of the companies listed above. He can honestly say that he has never had a cake that wasn't ultimately eaten. Corporate Executive Board is a Motley Fool Stock Advisor pick. Precision Drilling Trust is a Global Gains recommendation. The Motley Fool has a disclosure policy.

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.