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, a high-quality dividend payer 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.
Petrobras
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:
|
Company |
Yield |
CAPS Rating (out of 5) |
|---|---|---|
|
United States Steel |
4.3% |
**** |
|
Philip Morris International |
5.7% |
***** |
|
NYSE Euronext |
5.5% |
***** |
|
BHP Billiton |
3.4% |
**** |
|
ABB |
3.0% |
***** |
Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of April 16. 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'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 ABB.
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 who own the stock will run for the hills, causing the stock price to fall.
With that in mind, there are three things I immediately notice when kicking the tires of a dividend payer -- dividend history, balance sheet strength, and cash flow.
It's a mixed bag when it comes to ABB's dividends. Between 2002 and 2005, ABB shut off the dividend spigot altogether as heavy losses laid waste to the company's bottom line. Since that means we only have a few years of consistent dividend payments from ABB, we start our consideration on a bad note. Luckily, it gets better from there.
ABB has strengthened its balance sheet considerably in the past few years and today has more than $7.5 billion in cash against just over $2 billion in debt. Not only does this give the company a strong financial backbone, but it also has helped transform the net interest expense on the company's income statement to net interest income.
ABB's cash flow statement also gets a gold star. Since its struggles earlier in the decade, the company has gotten back on track and has been generating a considerable amount of cash above what it needs for its capital spending. This has allowed the company to bring back the dividend, pay down debt, and buy back shares.
What the bulls say
But of course, we need to look ahead to what the company will do, not just at the numbers that it's already produced. For that, I tuned into what the Fools on CAPS have been saying about the company.
As the perfect five-star rating suggests, ABB is a favorite on CAPS, with 1,586 outperform ratings versus just 46 underperform calls. Many of these ABB bulls like the prospects for the company to benefit from global infrastructure build-out and revitalization -- particularly with economic stimulus money flowing freely. CAPS All-Star A6EIntruder recently put a thumbs-up on the stock, saying: "This is all about a long term infrastructure play. I look for ABB to be increasingly active in China and third world markets, as well as a big player in NA."
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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