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.
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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
|
|---|---|---|
|
Coca-Cola |
3.34% |
**** |
|
Verizon |
6.01% |
**** |
|
Novartis |
3.86% |
***** |
|
Emerson Electric |
3.67% |
***** |
|
Tidewater |
2.28% |
**** |
Source: Yahoo! Finance and CAPS as of Aug. 6, 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 Emerson Electric is worth a hard look.Source: Yahoo! Finance and CAPS as of Aug. 6, 2009.
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.
In short, Emerson doesn't give dividend-seeking investors much to worry about. The company has been paying a dividend for decades and has raised that dividend by around 7% per year over the past 10 years. It carries a slug of debt on its balance sheet, but it's a very manageable amount, and the company has its interest payments very well covered.
On the cash flow side, Emerson really excels. The company consistently produces a very healthy amount of cash and has been able to fund not only capital spending and dividend payouts, but acquisitions and share buybacks as well.
If you're looking for something to grumble about with Emerson, the near-term outlook gives you that opportunity. The recently announced results from its fiscal third quarter missed analysts' expectations and was pretty unimpressive overall. The company also noted that it doesn't see any significant recovery until late 2010.
The stability of Emerson's financial position and the long-term need for the company's industrial and commercial technologies, however, give investors a lot of comfort that the company will surge its way out of the recession -- even if that's a year or more away.
What the bulls say
It's a pretty one-sided argument on CAPS when it comes to the five-star Emerson. More than 1,100 CAPS members have given the company's stock a thumbs-up, compared to just 22 who have rated it an underperformer.
One of those Emerson bulls is RLBOWERSOX, who gave the stock a thumbs-up in late July and highlighted the company's boring beauty:
Longtime highly respected company with consistent performance. The recession hasn't been much more than a burp for [Emerson]. I expect it will be back in stride quickly.
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.
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.
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