5 Dynamic Dividend Stocks

Ruth, Jordan, Montana. You don't have to be a sports fan to recognize those names, and there's a very good reason for that. All three of these athletes 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 that kind of day-in and day-out all-star 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 our Motley Fool Income Investor service's mission.

National Fuel Gas (NYSE:NFG), for example, has beaten the S&P 500 by 48 points since August 2005, and it is currently rewarding investors with a 4.0% yield. Or consider Petroleo Brasileiro (NYSE:PBR), which has topped the S&P by 47 points since August 2007, atop a current 6.1% 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 125,000-plus members of our CAPS community:

Source: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as of January 29. All yields listed are trailing and may not reflect recent corporate actions. RBC dividend yield calculated at $1.62 USD.

If you like what you see, but want more, you can run this screen for yourself with CAPS's 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 Yum! Brands.

Does my dividend have a glass jaw?
Compared to Income Investor pick Duke Energy, Yum! Brands is definitely a dividend rookie. Having focused on growth for most of its history, it wasn't until 2004 that the company started kicking dividends out to its investors. In fact, during the period between 2004 and today, Yum! Brands has been bending over backwards to return cash to shareholders, paying its dividend while at the same time buying back well over $6 billion in stock.

Now, how about that jaw? Though I wouldn't call Yum's a glass jaw, I also wouldn't want to see the company take too hard of a punch. You see, to buy back all of that stock and pay back dividends over the past few years, the company has not only used up a lot of the cash on its balance sheet, but it's taken on a bunch of additional debt. I like getting cash to investors as much as the next guy, but I generally like to see it happen in a more gradual -- and preferably debt-free -- fashion.

That's not to say that Yum! Brands' shareholders need to worry about imminently losing their dividend. Indeed, the company produced $534 million of free cash flow in 2008, more than enough to fund its $322 million in dividends. But with over $3.5 billion in debt on the balance sheet, and just $164 million in cash, the company may be best served by improving liquidity rather than continuing to buy back stock.

What the bulls say
The best investors out there find companies that they like and they wait, and wait, and wait for the price to be right. And now that prices are right and getting righter -- to put it euphemistically -- what companies are investors looking at? A great many of them are companies, like Yum! Brands, that have strong global brands that will help them not only survive the current tough times, but also hit a growth stride again when the recession ends.

Concern over the company's balance sheet has kept some highly rated CAPS members away from Yum! Brands, but the long-term potential -- particularly from overseas markets -- has led the overwhelming majority of the community to expect outperformance from the stock. directd is one of the 1,800 bulls on CAPS and shared some thoughts late last month:

Very bullish long term here. The fast food company that has more franchises than anyone in China? That's where I want to be! ... Love their idea of introducing a major Chinese fast food chain in China, with Taco Bell, Pizza Hut and KFC and they have a virtual monopoly on fast food (outside hamburgers) in the largest market in the world. ... Huge upside potential and great international presence I think this is a winner long term.

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:

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