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.

Coca-Cola (NYSE:KO), for example, has returned almost 41% since March 2009, and it currently is rewarding investors with a 2.8% yield. Or consider Southern Co. (NYSE:SO), which has climbed 42% since November 2003, atop a current 5.2% 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 CAPS community:

Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS as of Dec. 10.

Any one of these quality companies would add some dividend pizzazz to your portfolio. Let's take a closer look at how Motley Fool Inside Value pick 3M 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; not only do you lose your dividend payout, but many of the dividend-loving investors who own the stock will also 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.

But what's there to really worry about when it comes to 3M? The company has a highly diversified business across both products and geographies, and it sells everything from Scotch tape to systems to test for foodborne toxins.

From a financial perspective, the company has a very sound balance sheet, with a manageable amount of debt and nearly $4 billion in cash and short-term investments. Cash flow is more than healthy, and over the past 12 months, the company's operating cash flow was more than triple the amount that it paid out in dividends.

If there's anything for investors to be cautious about, it's not whether 3M will continue to pay and raise its dividend, but rather whether it's worth the current price. At $80 and change, the stock price is more than 16 times expected 2010 earnings. While this is hardly an excessive price to pay for such a high-quality, stable company, it's hard to expect home run returns at this price.

What the bulls say
With a perfect five-star rating, it's obvious that CAPS members hold 3M's stock in very high esteem. In fact, more than 3,800 CAPS members (including yours truly) have rated 3M an outperformer, versus just 130 who think it will lag the rest of the market.

CAPS All-Star kristm gave a thumbs-up on 3M back in late 2007, and shared why you don't let a good company go:

I bought this as a new investor in 1998. It didn't make me a millionaire in six months so I dumped it. Wish I hadn't been such an idiot then. Good thing Mr. Market gives us little bits of forgiveness from time to time where we can make up for past mistakes. Just wish I was adding it back to my real portfolio instead of to Caps.

For those keeping score at home, 3M's stock roughly doubled between 1998 and late 2007; the company's dividend nearly doubled over that time frame.

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.

Not satisfied with these yields? Fellow Fool Adam Wiederman serves up what he thinks are the best yields for the next 10 years.