Do you have a very best stock? A stock that brings you closer to retirement year in and year out? One like Kraft, formerly American Dairy Products, which -- as tracked back by Dr. Jeremy Siegel -- turned $1,000 into more than $2 million over 53 years with dividend reinvestment? In terms of returns, Kraft has quite literally been the very best stock of the past half-century.

I pay special attention to this stuff: My job is to find companies with that same magic that's made Kraft such a dynamite stock.

A repeatable fortune
What's the secret of Kraft's phenomenal digits? Well-branded products that a lot of people use, for starters. While that may be the bulk of it, those products aren't its only source of juju. The rest comes from two magic words: dividend reinvestment.

Don't think these words are powerful? Take a ho-hum stock -- or at least one that appears that way -- paying 5% in dividends yearly and racking up a modest 5% in capital appreciation. Start with $1,000 and reinvest those dividends. After 30 years, you'll have amassed a whopping $18,700!

The other side of the coin is that you could get those returns -- or better -- from a strong growth stock, but the dividend stock above gives you the flexibility to switch from reinvestment to an income strategy. In that example, you'd get almost $900 a year. Besides, which one do you think is the safer bet?

A few ideas for you
Paying dividends to shareholders also forces companies to exercise fiscal discipline. That's great, because being flush with cash tempts managers -- let's face it, they tend to have big egos -- to bungle their loads. And even if they don't slip up, they tend to hoard that cash away from shareholders without putting it to any use. That's why Microsoft's long-anticipated one-time $3-per-share dividend payout meant so much to shareholders, and why cash hoarders such as Yahoo! and VMware (NYSE:VMW) are underserving their owners. (I love a good tech firm, but it's time to share the wealth, guys.)

In a way, dividends encourage responsibility -- something that strikes a personal nerve with me. As co-advisor of The Motley Fool's dividend stock newsletter, Income Investor, I'm always on the lookout for corporations paying solid dividends, like the stocks I'll share with you now.

Like Kraft, Unilever (NYSE:UL) has an enormous portfolio of well-branded products that a lot of people use. Its brand names include food and beverages such as Breyers, Bertolli, Lipton, and Slim Fast, as well as health and beauty products like Dove, Suave, and Axe. At 2.6%, its yield isn't enormous, but alongside its decent dividend it has returned 14.6% per year to investors over the past five years. And that is impressive.

Philippine Long Distance Telephone (NYSE:PHI), a stock I personally own, sports a yield of 3.5%. But it's not for the faint of heart. This Makati City-based company has a virtual monopoly over telecom operations in the country. And while the yield is solid, the company often serves as a proxy for the entire Philippine economy -- which can be quite volatile.

CNOOC (NYSE:CEO), another stock I own, is a mothership oil and gas company in China yielding around 1.7%. Of course, a huge risk inherent in any Chinese company is that it's, well, a Chinese company. The upside is that darn near everybody agrees that oil and China in the same equation could yield some good returns.

Reynolds American (NYSE:RAI) yields a nice 5.3% and has done well for its shareholders. Nevertheless, it's a tobacco-industry stock. The consistent threat of litigation may keep some shareholders up at night.

Allied Capital (NYSE:ALD) yields a large 9.2%. It's a business development company that specializes in growth capital investments, recapitalizations, acquisitions, and buyouts. While this can be lucrative, the risk here is that it's hard to know the precise value of its investments.

The Foolish bottom line
These stocks aren't companies that are perfect for everyone; they're ideas to jump-start your research. The best stock for you might not be the best for another reader. The bottom line is that in seeking great stocks for your portfolio, I invite you to give a close look to dividend stocks. They're appropriate for just about everybody. They're closet performers, and they tend to do their jobs more safely than others.

Looking for more stock ideas? Income Investor is beating the market by more than five percentage points -- and I'm offering a free guest pass. Simply click here to learn more.

This article was originally published Nov. 14, 2006. It has been updated.

James Early owns shares of CNOOC and Philippine Long Distance. Kraft and Unilever are Income Investor recommendations. Microsoft is an Inside Value pick. Yahoo! is a Stock Advisor recommendation. The Motley Fool has a disclosure policy.