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.

Invesco (NYSE:IVZ), for example, has beaten the S&P 500 by 69 points since October 2004, and it currently is rewarding investors with a 2.4% yield. Or consider AGL Resources (NYSE:AGL), which has topped the S&P by 46 points since March 2004, atop a current 5.0% 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:

Source: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as of April 30.
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 kick you off with some thoughts on General Electric.

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: 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 places that I immediately tune into when kicking the tires of a dividend payer -- dividend history, balance sheet strength, and cash flow.

General Electric had a good record of paying dividends. It's been paying a dividend for a ridiculously long time, and over the decade ending in 2008, it boosted its payout almost 200%. But then the financial crisis struck. The industrial giant buckled under the weight of its finance segment, and it was forced to slash its dividend by 68%.

Historically, GE has produced more than enough free cash flow -- that is, operating cash flow after capital expenditures -- to easily support its dividend. As the company absorbs losses from its finance arm, though, we may find that it was a wise move to lower its dividend commitment; even if just for the near term.

If I'm lukewarm on GE's cash flow, I'm even less excited about its balance sheet. Though GE does hold an impressive $47 billion in cash on its books, its finance division has racked up a significant amount of debt -- $504 billion, to be exact. But GE's total financial leverage is lower today than it was a decade ago, so at least the company is moving in the right direction.

What the bulls say
Though overshadowed by the finance division right now, GE is still one of the world's premier industrial companies, with its hands in everything from energy infrastructure, to health care, to transportation. And let's not forget that it's also the parent company of NBC Universal. In addition, there is a chance that the finance division is not as much of a threat to the company as some assume.

Given the stock's four-star rating on CAPS, members are clearly mostly bullish on the stock. In fact, of nearly 14,000 ratings, 12,993 are outperforms. CAPS All-Star sandvig nailed a bullish call on GE -- logging the pick on March 11, right before the recent market bottom -- and said:

They are carrying a lot of debt, which scares me in these times. They also look very cheap. They provide things the world needs. They have a reputation for being a well run company. Buffet's participation gives me some comfort that the books are not cooked.

On balance, I have this feeling that 5 years from now, people will look back and say, "Can you believe you could buy shares of GE for less than $10 a share."

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. While there, you may also want to check out a few of the other top-rated dividend payers above.

Dividend stocks could help you transform your portfolio from the Bad News Bears to the Dream Team. And really, could you argue with having the stock equivalents of Michael Jordan, Magic Johnson, and Sir Charles Barkley helping your portfolio chalk up wins?

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