"Do you know the only thing that gives me pleasure? It's to see my dividends coming in." -- John D. Rockefeller

In one of my previous jobs, I helped manage a group of large individual investment portfolios. Some of those portfolios reached into nine figures.

The biggest investing lesson I took from studying those successful portfolios was this: Buy dividend-paying stocks and, most importantly, buy them early.

See, these portfolios contained long-term winners such as 3M (NYSE:MMM), which, in most cases, had been bought decades before and were now paying out tens of thousands of dollars in annual dividend income.

The owners of the portfolios didn't close their eyes, pick stocks like 3M out of a hat of blue chips, and hope for the best. They took the time to learn about and select companies with sustainable business models and long track records of increasing shareholder value through capital gains and dividend growth.

That extra effort to hand-pick the perfect dividend stocks paid off for them, and they're reminded of their wise decisions every quarter, when their dividend checks roll in.

Your turn to build a dividend dynasty
Not all dividend stocks are created equal, however. Witness the slashed dividends from stocks such as Fifth Third, KeyCorp, and even Circuit City (NYSE:CC) recently -- they serve as harsh reminders that dividend payments are not guaranteed. That's why it pays to study the company's earnings quality and payout ratio to make sure it can continue to pay dividends.

Before we get into all of that, however, let's get you a few dividend stocks to research. To get you started, we'll get help from both the 110,000 investors participating in Motley Fool CAPS and the new CAPS stock screener, and find dividend-paying stocks with:

  • Return on equity greater than 10%.
  • A dividend yield greater than 3%.
  • A four- or five-star CAPS rating.

Here are a few of the results:


CAPS Rating
(out of 5)

Dividend Yield

Coca-Cola (NYSE:KO)



General Electric (NYSE:GE)



GlaxoSmithKline (NYSE:GSK)



Bristol-Myers Squibb (NYSE:BMY)



Data from Motley Fool CAPS and Yahoo! Finance as of July 8.

These stocks are promising, but note: This is not a list of formal recommendations. Instead, use it as a starting point for further research.

What's to like?
When it comes to dividend-paying stocks, investors aren't necessarily interested in high growth, nor should they expect it. What's appealing about dividend stocks is they can provide income and earnings growth -- some might say it's the best of both worlds. Let's see why investors like these four dividend stocks.

Hovering near 52-week lows, the iconic American brand's stock could use a little caffeine boost. Back in February, Fraz2002 made a simple observation

Stock market goes up you drink coke. Stock market goes down you drink coke. Recession you drink coke. This pitch could go on forever. PS. Great emerging market play.

Is that really all there is to this stock's future? Voice your opinion on Coke by clicking here.

Thomas Edison's company has come a long way since producing the incandescent light bulb, and further deepened its bullpen of subsidiaries this week by adding the Weather Channel for $3.5 billion. SARdMc offered an opinion on the acquisition:

The stock probably got punished (rightfully so) because of its financial side and exposure to subprime nonsense. It is my undestanding that they have sold that aspect and have no exposure to subprime at this time. They just acquired the Weather Channel which should be a good earner and as the current economic downturn passes (and it will pass), this cream should rise to the top.

When you're a $126 billion health-care company, it's essential to add smaller companies under your umbrella to help drive earnings growth. In April, GlaxoSmithKline attempted to do so with an acquisition of Sirtris Pharmaceuticals for $720 million. The Fool's own TMFBreakerJava recently explained why Sirtris might be attractive to GSK: "Sirtris is pursuing research into anti-aging properties of the Sirtuin genes which are activated by Resveratrol, a component found in red wine."

Bristol-Myers Squibb
Presidential election years can throw government-sensitive industries like defense and health care into a temporary tizzy. Back in December 2006, CAPS All-Star OldNickel did his best modern-day Paul Revere imitation, alerting BMY investors that health care reform may be on the horizon by announcing: "The Democrats are coming! The Democrats are coming!" Come November, we'll find out if this was a wise prognostication.

What do you think about these stocks? Do you disagree with their ratings? CAPS' 110,000 investors are waiting to hear what you think. So sign up today. CAPS is 100% free and guaranteed to educate, amuse, and enrich.