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.
AllianceBernstein (NYSE:AB), for example, has returned 96% since August 2004, and is currently rewarding investors with a 5.3% yield. Or consider Alliance Resource Partners (NASDAQ:ARLP), which has returned 64% since November 2006 atop a current 4.3% 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 105,000-plus members of our CAPS community:
|
Company |
Yield |
CAPS Rating (out of 5) |
|---|---|---|
|
PPG Industries (NYSE:PPG) |
3.5% |
**** |
|
Novartis (NYSE:NVS) |
2.9% |
***** |
|
Aracruz Celulose (NYSE:ARA) |
5.8% |
***** |
|
Rayonier (NYSE:RYN) |
4.4% |
**** |
|
Otter Tail (NASDAQ:OTTR) |
3% |
***** |
Sources: Yahoo! Finance and CAPS as of June 12.
Any one 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 Motley Fool Hidden Gems favorite Otter Tail.
Dependable dividends
As we know, not all dividend payers -- and dividend payouts -- are created equal. For that reason, 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 fact that it's a billion-dollar company, most investors have probably never heard of Otter Tail. That's a shame, because this is a very interesting company that has provided its investors with steady growth, profits, and dividends over decades.
Otter Tail started out as an electric utility that provided service to Minnesota, North Dakota, and South Dakota. Along the way, though, management realized that the markets it was serving weren't all that large, nor were they growing very quickly. So what did it do? It started buying non-utility businesses with the cash flow generated by the utility, in order to grow the company and provide more financial stability. Today, it only generates about a quarter of its revenue from the utility business, getting the remainder from areas such as diagnostic medical equipment, PVC and polyethylene pipe production, potato dehydration, and wind tower manufacturing. You might say that it's a Renaissance man (Renaissance company?) of the business world.
Though the company's growth strategy requires a steady diet of cash for acquisitions, Otter Tail doesn't neglect its dividend. Since 1990, the company has had a very good record for paying and growing its dividend -- and though growth hasn't been particularly fast, it has managed to raise the payout every year for all of those years.
On CAPS, the company's five-star rating comes from a bull-to-bear ratio of more than 30 to 1. CAPS All-Star and Otter Tail fan redpointMK called the company "sleepy and strange" but added that he appreciates its diversity and dividend. Meanwhile, fellow All-Star jbomb1 gave the thumbs-up to Otter Tail back in August 2006, noting:
This company is good solid value for the long haul. If you want to have a virtually stress free ride over the next ten years then Otter Tail is a great selection. Steady dividends combined with an excellent leadership core will provide you with lots of smile from here through 2016 and beyond.
You can check out who else has been bullish on Otter Tail, as well as 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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