5 Dynamic Dividend Stocks

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.

Health Care REIT (NYSE:HCN), for example, has beaten the S&P 500 by 63 points since September 2003, and currently rewards investors with a 6.3% yield. Or consider Alliance Resource Partners (NASDAQ:ARLP), which has topped the S&P by 44 points since November 2006, atop a current 7.9% 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 140,000-member CAPS community:

Source: CAPS; as of Oct. 8. 

Any one of these quality companies would add some dividend pizzazz to your portfolio, but let's take a closer look at how medical-device maker Medtronic stacks up.

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

It's hard to poke holes in Medtronic's finances. The company produces gobs of cash flow and has comparatively little capital spending requirements. This, of course, leaves behind plenty of cash to pay its dividends and buy back its own shares. Medtronic has also produced some of its growth through acquisition, and its hefty cash flow has allowed it the flexibility to make these purchases without raising huge amounts of debt.

Medtronic's balance sheet doesn't disappoint either. As of July 31, the company held more than $1.5 billion in cash, and though there is a considerable amount of debt, the company has its interest payments very comfortably covered.

Business stability also comes in on the "pro" side for this medical-device maker. Medtronic helped develop the pacemaker back in the 1950s and is still a leader in the area of cardiac rhythm management. But today the company also offers products that treat a variety of other conditions, including injuries to and conditions of the spine, narrowing or clogged arteries, psychological disorders, and diabetes.

Now I'd be remiss if I didn't bring up the tough economy and specter of health-care reform, but the medical importance of Medtronic's products and its market leadership provide it significant defense against these threats.

What the bulls say
Although 70 members of the CAPS community think Medtronic's stock will lag the rest of the market, 1,124 others have given it a thumbs-up, and it currently carries a four-star rating (out of a possible five).

CAPS All-Star OpesPerPrudentia is one of the many Medtronic bulls, highlighting the opportunity that baby boomers offer the company:

The health care industry in the United States has nothing but growth ahead of it as increasing numbers of Boomers require health care and medical electronics that hospitals and standard in-office practices simply will not be able to keep up with. Any company with this kind of cash flow that aims to put medical tech in the hands of homecare outfits and even patients will explode with every passing year.

Get into the action
You can check out who else has been bullish on this stock, 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.