The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s had one crucial element in common: consistent excellence in their organizations and performance. That's a rare accomplishment, but if you think it could never occur in your portfolio, think again. Carefully chosen dividend-paying stocks could be your key to superstar returns.
Build the next investing dynasty
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 is the mission of our Motley Fool Income Investor service.
Constellation Energy Group (NYSE:CEG), for example, has returned more than 148% since June 2004, and it's currently rewarding investors with a 1.9% yield. Or consider Diageo (NYSE:DEO), which has returned 71% since April 2004, atop a current 3.1% yield. While these stocks happen to be Income Investor recommendations, you don't need to be a subscriber to get these great gains.
Identify new talent
With the help of Motley Fool CAPS, we'll search for the best dividend-paying stocks around. Here are several dividend picks that have also earned high ratings from the 85,000-plus members of our CAPS community:
|
Company |
Yield |
CAPS Rating (out of 5) |
|
Altria (NYSE:MO) |
4% |
***** |
|
American Capital Strategies (NASDAQ:ACAS) |
10.9% |
***** |
|
Anheuser-Busch (NYSE:BUD) |
2.8% |
**** |
|
3M (NYSE:MMM) |
2.5% |
***** |
|
Exelon (NYSE:EXC) |
2.6% |
**** |
Sources: Capital IQ, Yahoo! Finance, and CAPS as of Feb. 28.
Any one of these quality companies would add some dividend excellence to your portfolio. Still, I thought I'd kick off further research with a closer look at Income Investor favorite American Capital Strategies.
Dependable dividends
In American Capital Strategies, investors can find a kindred spirit -- after all, American Capital is an investor itself. It's the largest business development company (BDC) and one of the largest publicly traded alternative asset managers in the United States. BDCs are very similar to venture capital and private equity funds, but unlike those firms, they're publicly traded, and they allow non-accredited investors to participate.
On the dividend front, American Capital is a yield-monger's dream come true. Since its IPO in 1997, the firm has increased its dividend every year, returning a total of $27.17 to shareholders -- extremely impressive, when you consider that the company's IPO price was $15 per share. Dividends for 2008 are expected to be $4.19, an 11.3% yield for today's investors.
American Capital is certainly not immune from the current market turmoil, and the credit market's gyrations are of particular concern for a company in this business. However, when the company announced its most recent quarterly results, management leapt at the opportunity to demonstrate the company's resilience.
The stock is a definite favorite on CAPS, with nearly 1,400 bullish entries versus just 35 bearish votes. One of CAPS' All-Stars, dhd1491, is particularly bullish on American Capital. He wrote last August, "How can you not like a company that has the dividend record that [American Capital] has?" He also went on to highlight his faith in management:
"The performance of the company speaks for itself. Malon Wilkus' leadership has been superb. Plus, Mr. Wilkus backs up his clear belief in his company with his own money; over $60 million of it. And he never seems to sell, at least not in the last two years of SEC filings that I looked at."
You can see who else has been bullish on American Capital, and chime in with your own thoughts, by heading over to CAPS. You may also want to check out a few of the other top-rated dividend payers above while you're there.
Dividend stocks could help you transform your portfolio from the flash-in-the-pan Florida Marlins into the dependable New York Yankees. And if you hate the Yankees, it's probably because they're so darn good, so darn often.
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