5 Dynamic Dividend Stocks

The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s had one crucial element in common: consistent excellence in their organizations and performance. If you think such a rare accomplishment 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 our Motley Fool Income Investor service's mission.

Procter & Gamble (NYSE:PG), for example, has returned nearly 25% since February 2009, and it's currently rewarding investors with a 2.8% yield. Or consider Enterprise Products Partners (NYSE:EPD), which has climbed nearly 79% since May 2004, atop a current 7.5% 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 145,000 members of our CAPS community:

Source: Capital IQ a division of Standard & Poor's, Yahoo! Finance, and CAPS as of Nov. 25.

Any one of these quality companies would add some dividend pizzazz to your portfolio. Let's take a closer look at how Income Investor pick Duke Energy stacks up.

Does my dividend have a glass jaw?
The last thing we want in a dividend-paying company is the risk that the business will fall off a cliff and have to pull back its payout. This usually ends up being a double whammy; even as you lose your dividend payout, many of the dividend-loving investors who own shares will run for the hills, causing the stock price to fall.

With that in mind, there are three places I immediately check when kicking the tires of a dividend payer: dividend history, financial statements, and business stability.

Duke Energy's history is only moderately useful to us in evaluating the Duke Energy of today. In 2006, the company completed a merger with Ohio's Cinergy, adding significant capacity and service area to Duke's operations. A year later, the company spun off its natural gas business. At the same time, Duke named a new CEO, and tried to shrug off its past overexpansion mistakes and foray into power trading.

But the new Duke seems to be a company with a renewed focus on what makes a utility a great stock for dividend lovers -- reliable, stable power generation and transmission operations. The Duke of today is also far less leveraged than the pre-2005 Duke, giving it much greater financial flexibility and less chance of running into debt trouble.

Of course, investors still can't just fall asleep when it comes to Duke. The company has significant capital spending plans in the years to come -- to the tune of $25 billion between 2009 and 2013. About half of this will go toward overhauling its current assets, and a significant portion of the rest will take advantage of expansion opportunities. And though the company does have nuclear, wind, and hydroelectric operations, about two-thirds of its generation comes from coal-fired plants, which leaves the company exposed if and when environmental regulations shift in order to emphasize cleaner energy.

What the bulls say
Fans of PIMCO's Bill Gross, take note: His December "Investment Outlook" commentary included a pitch for owning utilities. But don't take Gross's word for it -- on CAPS, more than 1,600 members believe that Duke Energy's stock will outperform the rest of the market.

CAPS member HomerJFool joined the bullish chorus at the end of October, pointing out Duke's efforts to make its power generation a lighter shade of green:

While possessing solid fundamentals and an attractive dividend yield at current price levels (~6%), it's Duke's efforts to position themselves to take advantage of evolving energy policy (aggressive investments in alternative supplies, 'green' initiatives, etc) that makes them one of the more attractive utilities in the long term.

Get into the action
You can check out who else has been bullish on these stocks, and 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.