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.

Bank of Nova Scotia (NYSE:BNS), for example, has beaten the S&P 500 by 28 points since June 2007, and it currently is rewarding investors with a 4.1% yield. Or consider POSCO (NYSE:PKX), which has topped the S&P by 129 points since April 2005, atop a trailing 1.9% 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:



CAPS Rating
(out of 5)

Pfizer (NYSE:PFE)



Waste Management (NYSE:WMI)



Tesoro (NYSE:TSO)



Raytheon (NYSE:RTN)



Honeywell (NYSE:HON)



Source: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of Aug. 3, 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 Waste Management 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.

Since Waste Management got its dividend act together in 2004 and started paying a substantial dividend again, things have been pretty good for investors. Each of the last four years the payout has been bumped roughly 10%. However, the fact that the company practically cut out its dividend between 1999 and 2003 can't sit too well with yield-seeking investors.

Taking a peek at Waste Management's financial statements, the company hasn't exactly set the world on fire with revenue growth, but cost-cutting measures have helped it increase profit margins in recent years. The company's balance sheet sports a considerable amount of debt, but it's a manageable amount for a stable waste collection company.

Cash flow is where it's at for Waste Management -- because of the huge amount of depreciation on the company's equipment, it produces much more cash flow from operations than it does net income. That cash flow is well above what the company spends on capital expenditures and dividend payments. In fact, over the past few years, the company has found itself with enough extra scratch to buy back billions of dollars worth of shares.

And finally we come to business stability. On the whole, Waste Management gets a big gold star in this category. After all, consumers aren't about to cancel trash pickup because of a recession. However, the company isn't wholly immune from recessionary pressures. As its second-quarter earnings recently revealed, volumes have been dropping at its landfill and transfer station operations, and that put some pressure on the top line.

What the bulls say
While we can't expect rapid growth from consumer trash pickup services, there are some growth drivers within Waste Management. The company provides recycling services to its customers -- an area that is still growing. It also has operations that turn certain types of waste into steam power, and as you can imagine, this is another area that could provide a nice growth kick.

It was these two operations that CAPS member sett0047 highlighted when giving the stock a thumbs-up back in June:

Strong dividend yield (4.2%) with attractive upside in renewable energy through its waste gasification process. The company's landfills are now generating enough methane gas to power small cities. Additionally, the company's recycling business should rebound as commodity prices rebound (particularly crude/resin prices).

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:

Pfizer and Waste Management are Motley Fool Inside Value selections. Bank Of Nova Scotia, POSCO, PepsiCo, and Waste Management are Income Investor selections. 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.