The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s have one crucial element in common: consistent excellence in their organizations and performance. That's a rare accomplishment, but if you think it could never occur in your portfolio, think again. Carefully chosen dividend-paying stocks could be your key to superstar returns.

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. Finding them is the mission of our Motley Fool Income Investor service.

California Water Service (NYSE:CWT), for example, has beaten the S&P 500 by 54 points since September 2003, and it currently is rewarding investors with a 3.3% yield. Or consider Southern Company (NYSE:SO), which has topped the S&P by 29 points since November 2003, atop a current 5.5% 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 135,000 members of our CAPS community:

Company

Yield

CAPS Rating
(Out of 5)

AT&T (NYSE:T)

6.7%

****

Montpelier Re (NYSE:MRH)

2.1%

****

Frontline (NYSE:FRO)

4.7%

****

Penn West Energy Trust (NYSE:PWE)

12.3%

*****

sanofi-aventis (NYSE:SNY)

4.5%

****

Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of July 23, 2009.

Any one of these quality companies would add some dividend excellence to your portfolio, but let's take a closer look at why CAPS members think that Penn West Energy Trust is worth a hard look.

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 places that I immediately tune into when kicking the tires of a dividend payer -- dividend history, financial statements, and business stability.

Unfortunately, history can't be much of a guide for us when it comes to Penn West. The company only converted to its current trust structure in 2005, and prior to that didn't pay a dividend. Making matters worse, Canada has enacted tax laws for royalty trusts that will, sometime after 2011, eliminate much of the tax advantage that Penn West and other trusts have. So the dividends that we see today may or may not be what we see a few years from now.

Recent financial history gives some comfort on the company's dividend. While Penn West carries a substantial amount of debt, it is less than 50% of equity, and the company has had its interest payments well covered. And for the most part, cash flow over the past few years has been able to cover capital spending and dividend payments.

History clouds the picture a bit here, too, though. Prior to the company's conversion to a royalty trust, it typically spent more than its total cash flow on capital expenditures, and financed itself through debt and equity issuances. It's been a much different picture since the conversion, but that period has also overlapped with a very favorable time for oil and gas companies.

Though Penn West puts hedges in place on oil and gas prices, it is still heavily dependent on the price levels for those energy products. While there are some very good reasons to be bullish on energy products, the volatility in those markets over the past couple of years means that Penn West investors are likely to be kept on their toes.

What the bulls say
Putting on my "conservative investor" hat, I would warn against being tempted to blindly jump on Penn West just because it has such a juicy dividend yield. Given the short history the company has in its current form, the volatility of the energy markets, and the changes it will be going through when the new tax laws kick in, this is a stock that needs to be watched closely.

With that said, should the company be able to continue to deliver near what it has since its royalty trust conversion, then it appears to be priced at a nice discount. And it's hard to argue with the attractiveness of the current double-digit yield.

A whopping 98% of the nearly 1,300 CAPS members who have weighed in on Penn West's stock have rated it an outperformer. Back in May, one of CAPS' top-performing members, bullishbabo, offered four reasons to be bullish on Penn West:

1. It is trading below book value and has a great earnings record.

2. It has a great dividend history and yield.

3. It's a play on oil/natural gas.

4. If the US dollar starts to collapse in value a bit, this company's Canadian dollars will translate into more earnings in US dollars.

This CAPS player didn't overlook the tax changes, writing: "I understand the 2011 tax situation with these Canroys, but even as corporations, these things would still have good yields."

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 flash-in-the-pan Florida Marlins into the dependable New York Yankees. And if you hate the Yankees, it's probably because they're so darn good, so darn often.

More CAPS Foolishness:

Montpelier Re Holdings is a Motley Fool Stock Advisor recommendation. California Water Service Group and Southern Company are Motley Fool Income Investor picks. Montpelier Re Holdings is a Motley Fool Hidden Gems recommendation. Try any of our Foolish newsletters today, free for 30 days

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned in this article. You can check out the stocks he's keeping an eye on by visiting his CAPS portfolio, or connect with him on Twitter @KoppTheFool. The Fool’s disclosure policy pays its dividends in reliability.