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 the 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.

Huaneng Power (NYSE:HNP), for example, has beaten the S&P 500 by 47 points since March 2008, and it currently is rewarding investors with a 6.5% yield. Or consider Southern Company (NYSE:SO), which has topped the S&P by 41 points since November 2003, atop a current 6% 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 130,000-plus members of our CAPS community:

Sources: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as of March 5.
All yields listed are trailing and may not reflect recent corporate actions.

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 get you started with some thoughts on United Technologies.

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

Investors have been treated to dividend checks from United Technologies for a long time, and the company's financials make future payouts look very likely. Cash flow from operations consistently clocks in higher than net income, and after backing out money spent on capital expenditures, there's still more than enough money to pay the dividend. In fact, there's so much cash flowing from the business that the company has been able to make significant acquisitions and buy back billions of dollars' worth of shares.

Turning to the balance sheet, we find a similarly attractive picture. Though the company carried over $11 billion of debt at the end of the year, it also hung onto $4.3 billion in cash and equivalents, bringing net debt to less than 50% of equity. At the same time, interest payments on the debt are covered by operating profit more than 10 times over.

What the bulls say
Behind United Technologies' good-looking financials are multiple quality businesses. These businesses include elevator and escalator manufacturing and installation; residential, commercial, and industrial heating, ventilating, and air conditioning (HVAC); and aerospace and defense products. As might be expected, some of the businesses -- particularly the elevators and escalators and HVAC -- have started to cool as the economy has deteriorated, but the company's diversity helped it report 8% net income growth in its fourth quarter.

Nearly 1,300 CAPS members have rated United Technologies' stock an outperformer, and they've highlighted a lot of different reasons to be bullish on the company. One of these bulls, CAPS All-Star tiredofbeinbroke, chimed in last summer and said:

[United Technologies] is positioned to be the leader in building systems and aerospace technologies. Their focus on being "green" and creating new ways to protect the environment will be a huge factor in their future success. As the world turns to green companies, and the government enforces companies going green, [United Technologies] will be light years ahead of the game. ...With moderate debt on the books and high return on equity, I see this company to a be a strong buy for the 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?

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