We've noted before that dividend investing is a tried-and-true strategy for building long-term wealth. In fact, a study by Ned Davis Research found that dividend-paying stocks have outperformed their stingier counterparts 10% vs. 4% annually from 1972 to 2006.

In other words, you can generate sizable investment returns, even during times of market turmoil, if you can identify dividend stocks that will set you for life.

With that in mind, we used the Fool's CAPS screening tool to look for companies that pay a strong dividend. Below are five companies rated to outperform the market by more than 100 All-Stars -- CAPS members whose track records rank them in the top 20th percentile of our 145,000-member investing community.

These stocks also have:

  • Market caps greater than $1 billion.
  • Dividend yields greater than 2%.
  • Five-star ratings, the highest possible, from our CAPS community.



Dividend Yield

All-Stars Rating Outperform / Underperform

Philips (NYSE:PHG)



171 / 5

ConocoPhillips (NYSE:COP)

Oil & Gas


1,468 / 21

Exelon (NYSE:EXC)



272 / 7

Northwest Natural Gas (NYSE:NWN)

Gas Utilities


47 / 0

National Grid (NYSE:NGG)



88 / 1

Sinopec (NYSE:SNP)

Oil & Gas


303 / 9

France Telecom (NYSE:FTE)



167 / 7

Data from Motley Fool CAPS and Yahoo! Finance as of Dec. 16, 2009.

Remember, this screen is only a starting point in the research process. When selecting dividend payers, Fools know it's important to make sure a company has sufficient free cash flow to sustain and grow its dividends for years to come.

Come and join us on Motley Fool CAPS to dig into these companies further. Let our 145,000-strong (and counting) CAPS community help you make better stock selections.

Exelon is a Motley Fool Inside Value selection. France Telecom and National Grid are Motley Fool Income Investor selections. The Fool has a disclosure policy.