"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 Wrigley (NYSE:WWY), 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 Regions Financial (NYSE:RF) and First Place Financial (NASDAQ:FPFC) 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 seek help from both the 110,000-plus members of Motley Fool CAPS. We'll use the new CAPS stock screener to 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

Diana Shipping (NYSE:DSX)



EnterpriseProducts Partners (NYSE:EPD)



Sanofi Aventis (NYSE:SNY)



Public Service Enterprise Group (NYSE:PEG)



Data from Motley Fool CAPS and Yahoo! Finance as of July 28.

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. Dividend stocks are appealing because they can provide income and earnings growth -- some might call them the best of both worlds. Let's see why investors like these four dividend stocks.

Diana Shipping
Since last fall, the Greek dry bulk shipping company has encountered some turbulent waters; its shares are currently 37% off their October 2007 highs. On its CAPS page, it's received some more love from our All-Star players (those rated in the top quintile), with only one All-Star giving it an underperform rating so far this month. Bulls cite the strong dividend and global demand for dry bulk shipping as reason enough to give Diana Shipping a second (or first) look.

Enterprise Products Partners
With oil magnate T. Boone Pickens now backing natural gas and wind energy, investors would be crazy not to at least research companies in these industries. Is Enterprise Products one of those companies? CAPS member investu thinks so, calling the pipeline services company the "North American 'super highway' of oil and gas" as well as the "lead dog" in the sector.

Sanofi Aventis
When you're a $9 billion health-care company, it's essential to add smaller companies under your umbrella to help drive earnings growth. The French company has been trying to empty its wallet as of late. Just yesterday, it announced it was adding U.K. vaccine maker Acambis for $551 million, and it's still trying to court Czech generic drug manufacturer Zentiva, which recently rejected Sanofi's takeover offer. On CAPS, Sanofi enjoys 95% bullish support from the 222 All-Star members who have rated it.

Public Service Enterprise Group
The New Jersey-based gas and electric utility has paid a dividend annually since 1907, and dividend-thirsty CAPS investors have bestowed it with the coveted five-star rating. In June, CAPS member slimpickins2 argued that electric companies "are a safe bet in the midst of all the environmental talk and cutting back on oil consumption and pollution, I think they will benefit as energy consumption is pointed in other directions."

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

Enterprise Products Partners is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletter services free for 30 days.

Todd Wenning is dividend-crazy, but he does not own shares of any company mentioned in this article. The Fool's disclosure policy wallpapered its room with Enron stock certificates.