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5 Dynamic Dividend Stocks

By Matt Koppenheffer - Updated Apr 5, 2017 at 6:56PM

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Your portfolio's growth doesn't have to come from capital gains alone. Check out these solid stocks that pay you to hold them.

Ruth. Jordan. Montana. You don't have to be a sports fan to recognize those names. And there's a very good reason for these athletes’ fame: All three made magic happen whenever they competed. Even more importantly, when the chips were down, you could still count on these guys to deliver.

In times of economic turmoil, wouldn't it be great to have a performer like that in your portfolio? Well, high-quality dividend payers can be just the kind of day-in and day-out all-stars that you're looking for.

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. At the same time, they can provide a solid defense against crazy market conditions. Finding them is the mission of our Motley Fool Income Investor service.

FranceTelecom (NYSE:FTE), for example, has beaten the S&P 500 by 61 points since December 2005, and it is currently rewarding investors with a 6.8% yield. Or consider Invesco (NYSE:IVZ), which has topped the S&P by 33 points since December 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 120,000-plus members of our CAPS community:



CAPS Rating (out of 5)

Altria (NYSE:MO)



Steel Dynamics (NASDAQ:STLD)



Kellogg (NYSE:K)



Legg Mason (NYSE:LM)






Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of Dec. 18.

If you like what you see, but want more, you can run this screen for yourself with CAPS' handy screener. While these are not formal recommendations, they're a great place to kick off further research and potentially add some dividend excellence to your portfolio. In fact, I'll even kick you off with some thoughts on Kellogg.

Does my dividend have a glass jaw?
The last thing we want to find in a dividend-paying company is the risk that the company will fall off a cliff and have to pull back its dividend. When this happens, it usually ends up being a double whammy -- not only do you lose your dividend payout, but many of the dividend-loving investors who own the stock run for the hills, causing the stock price to fall.

Fortunately, Kellogg's dividend defense appears to be ironclad. Over the past 12 months, the company's payout ratio -- that's the dividend divided by earnings -- has been 42%, which is not only a sustainable level, but is also down from last year. And that's despite boosting the dividend by almost 6%. From a cash flow perspective, Kellogg is pretty safe as well -- of the $1.4 billion of cash flow from operations over the last year, only $475 million was needed for capital spending, leaving enough left over not only for the dividend, but also to do a good amount of share buybacks.

And Kellogg's business? Well, I don't know about anyone else, but recession or not, I'd have a tough time justifying cutting back on Frosted Mini-Wheats and Cheez-Its. While I'm sure Kellogg will feel some pinch from the economy, it's unlikely that consumers will cut back in a big way on the company's products. Moderating commodity prices, which had been pressuring the company, may also provide some cushion.

What the bulls say
There aren't too many safe ports in this economic storm, but most CAPS players seem to think Kellogg is one of the few. Of 631 members who have weighed in on the stock, 576 expect that it will outperform the broader market. One of these Kellogg fans is CAPS All-Star PennyPincher12, who shared some bullish thoughts back in mid-November:

Over 50% return on equity, good sales growth, repurchase record, profit margins....

Not to mention just the economics of name brand cereals are fantastic. This is a very good price too, I'd be willing to pay more.

Gotta be bullish.

Get into the action
You can check out who else has been bullish on these stocks, 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 Bad News Bears to the Dream Team. And really, could you argue with having Michael Jordan, Magic Johnson, and Sir Charles Barkley help your portfolio chalk up wins?

More CAPS Foolishness:

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool PRO team will accept new subscribers to their real-money portfolio service. Motley Fool PRO is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool PRO and to receive a private invitation to join, simply enter your email address in the box below.

Invesco and France Telecom are Motley Fool Income Investor selections. Legg Mason is a Motley Fool Inside Value pick. PACCAR is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Legg Mason.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool’s disclosure policy agrees that Cheez-Its are the bomb.

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Stocks Mentioned

Kellogg Company Stock Quote
Kellogg Company
$75.62 (0.30%) $0.23
Altria Group, Inc. Stock Quote
Altria Group, Inc.
$45.15 (0.04%) $0.02
Steel Dynamics, Inc. Stock Quote
Steel Dynamics, Inc.
$84.61 (1.34%) $1.12
Legg Mason, Inc. Stock Quote
Legg Mason, Inc.
Orange Stock Quote
$10.34 (0.00%) $0.00
Invesco Ltd. Stock Quote
Invesco Ltd.
$19.07 (3.14%) $0.58
PACCAR Inc Stock Quote
$93.73 (0.79%) $0.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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