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 the mission of our Motley Fool Income Investor service.

Enterprise Products Partners (NYSE:EPD), for example, has beaten the S&P 500 by 43 points since May 2004, and it is currently rewarding investors with a 9.7% yield. Or consider ONEOK (NYSE:OKE), which has topped the S&P by 23 points since November 2005, atop a current 6.3% 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 April 9. 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 Garmin.

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.

With that in mind, there are three things I immediately look for when kicking the tires of a dividend payer -- dividend history, balance-sheet strength, and cash flow.

Garmin is not an especially old company, and it has even less of a history as a public company. Though the company has paid a dividend for most of the years that it's been public, it's not an especially impressive record, considering it turned off the spigot in 2001 and 2002 and dividend hikes haven't been particularly reliable.

The company's current financial strength to back up its dividend, however, is considerably more impressive. The GPS giant's balance sheet sported about $700 million in cash at the end of 2008, and there wasn't a speck of debt. Cash flow is pretty outstanding as well, and Garmin actually produced more cash in 2008 versus 2007 despite lower earnings, thanks to better balance-sheet management. Garmin has consistently produced more cash than it needed to pay its dividend -- interestingly, even in the years it didn't pay one -- and in recent years has spent a pile of leftover cash on share buybacks.

What the bulls say
Tuning in to the opinions of the CAPS community, we find more than 5,000 members who are bullish on the stock versus just 310 who think it will lag the rest of the market. Brianlucas is one of those 5,000-plus Garmin fans, and added a thumbs-up last month with this pitch:

Financial indicators are very good: low debt, good ROA and margin, dividend yield 4%, price has plenty of room to grow. Company is a market leader and is continuing to innovate. It probably won't take off right away -- Garmin is a bit dependent on retail sales and the broader consumer market -- but it's a financially solid company whose shares are worth less than half what they were a year ago, and is well placed to recover.

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:

• Good sense in stock picking.
• Looking for a stock sale? Look no further.
• Check out the picks from a CAPS All-Star.