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.
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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 our Motley Fool Income Investor service's mission.
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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 100,000-plus members of our CAPS community:
|
Company |
Yield |
CAPS Rating (5 Max) |
|---|---|---|
|
DuPont |
3.4% |
***** |
|
Marathon
Oil |
2.1% |
***** |
|
BP |
4.5% |
**** |
|
Canon |
1.7% |
***** |
|
Eaton |
2.3% |
***** |
Any of these quality companies would add some dividend excellence to your portfolio, but I thought I'd kick off further research with a closer look at energy giant BP.
Dependable dividends
Not all dividend payers and dividend payouts are created equal, so it's important to make sure that the dividend you're expecting isn't about to take an extended vacation with the dodo bird. To figure this out, I like to look at the prospects for the company's business, the company's history of paying dividends, and the sustainability of the current dividend.
Despite the spectacular energy market over the past few years, BP has stood out as one of the few major oil and gas players to elicit about as much excitement as college-ruled white notebook paper. The problem was that while Exxon, Chevron, and the rest of the oil patch were doing what they do best -- churning out oil -- BP has been dealing with legal problems, infrastructure problems, a CEO transition, and other sticky issues that went a long way toward dulling investor confidence.
The underlying business, though, has remained stable all along. Even better, the tides might be starting to turn. The new leadership from Tony Hayward seems to be reinvigorating the company, and the most recent quarter revealed some pretty impressive growth.
There's no clowning around when it comes to BP's dividends. It has been paying its ordinary shareholders a quarterly dividend since early 1989. The company is committed to growing the dividend, and given the current market for its products, that shouldn't be an issue. Even better, BP has been using any free cash flow left after paying the dividend to buy back stock. Over the past three years alone, the company has bought back more than $33 billion in stock, on top of paying out more than $22 billion in dividends.
BP hasn't quite made it into the top five-star echelon in CAPS, but its bull-to-bear ratio of more than 15-to-1 is nothing to sneeze at. So why are CAPS players rushing to BP? Many like it simply as another play on oil and gas. Ctnotebo, for instance, recently noted that the upcoming summer driving season should give it a boost:
Although the season for natural gas is over, the summer months are upon us and that brings travelers. Traveling requires gasoline, and since BP is one of the major producers of oil/gasoline, I chose their stock. As demand increases, (regardless of the prices), their revenues will increase.
You can check out who else has been bullish on BP, as well as chime in with your own thoughts, by heading over to CAPS. While you're there, you may also want to check out a few of the other top-rated dividend payers we mentioned in this story.
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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