There's no such thing as a free lunch? Yeah, right. I've had many complimentary meals at Fool HQ, and I get plenty more free lunches from my brokerage. Not in the form of actual sandwiches, mind you; instead, I'm invested in a bunch of companies that cut me checks every quarter or so, whatever else is going on in the market or their business. If you've got a hunger for free lunch, you might want to check them out yourself.

Have a cookie with that sandwich
A robust dividend can sweeten the many benefits of an already powerful investment. Just check out the mouthwatering yields and returns on these blue-chip titans:


Net Profit Margin

Forward P/E

Return on Equity

Dividend Yield

20-Year Avg. Annual Return

ExxonMobil (NYSE: XOM)






Pfizer (NYSE: PFE)






Procter & Gamble (NYSE: PG)






Coca-Cola (NYSE: KO)






General Electric (NYSE: GE)






Intel (Nasdaq: INTC)






Chevron (NYSE: CVX)












Data: Yahoo! Finance, Motley Fool CAPS.

Procter & Gamble has upped its net profit margin from the high single digits in the early 2000s to above 16% in recent years. Despite the recent tough economy, it has grown its revenue by an annual average of 7% over the past five years, and its earnings per share (EPS) by 11%. Its recent price-to-earnings ratio (P/E) is also below its five-year average of 20.

Pfizer's P/E ratio is well below its five-year average of 17.5, though its net margins and ROE have trended down in the past few years.

ExxonMobil is worth watching, despite its P/E ratio being above its five-year average of 12. Its ROE and net margins, among other things, have fallen in recent years, but as the economy heats up, it's likely to improve its numbers.

General Electric, like ExxonMobil, doesn't have the most impressive numbers; its ROE, for instance, is close to 10%, down from the 20% range earlier in the decade. But it's another company likely to benefit significantly when the economy recovers.

Coca-Cola boasts net margins above 20% and an ROE above 30, both impressive numbers. In the recent dismal economy, it has grown its revenue and EPS by an annual average of 8%, and its P/E ratio is below its five-year average of 21.

Intel's net margins and ROE had trended down in recent years, but they're showing signs of perking back up. Chevron and DuPont, similarly, are showing improvement in trailing-12-month numbers.

These companies dominate their respective industries, and they've all posted decades of respectable performance for shareholders. Better yet, as the table reveals, each pays shareholders a healthy dividend. But wait! The picture gets even prettier.

A win-win-win situation
Most healthy and growing dividend-paying companies tend to increase their payouts regularly. Procter & Gamble and Coca-Cola, for example, have raised their dividends by an annual average of around 10% over the past five years. Right now, in addition to the share-price appreciation I expect they'll give me over the years, the 100 shares of Coca-Cola I own pay me $176 every year -- absolutely free.

A strong dividend-paying company these days yields roughly 3% or 4% a year. On its own, that's respectable enough; it tops most savings accounts, CDs, and money market funds these days, and it'll keep you even with or ahead of the typical rate of inflation. But factoring in dividend growth sweetens the deal even further. If a 3% dividend grows at 10% each year, it could end up paying you 7.8% of your purchase price a decade later. In real-world terms, my $176 from Coca-Cola could become $457 a year in a decade, and nearly $1,200 in 20 years.

Better still, the stock's price will likely appreciate on its own, above and beyond the rise of its dividend.

Any way you look at it, many companies are standing ready to offer you a free lunch. You can find the most attractive types of dividend payers by looking for:

  • Revenue and earnings growth.
  • A meaningful and amply growing dividend.
  • Robust profit margins.
  • Solid returns on equity.
  • Little or manageable debt.
  • Management you admire.
  • An attractive valuation.

Once you find a slate of compelling dividend payers, sift through them to find the companies whose dividends are rising at a good clip -- perhaps 7% to 10% annually. Then make sure the payout ratio isn't too high -- that the company isn't paying out more in dividends than it can easily afford. Otherwise, that nice fat dividend could wither away with little warning.

If you'd like help finding more financial free lunches -- sorry, we can't do anything for you sandwich-wise -- try our Motley Fool Income Investor service absolutely free for 30 days. On average, its picks are beating the market handily, with an average dividend yield of more than 4%, and roughly 10 picks (the last time I checked) offering a yield exceeding 6%. Click here to learn more.

Longtime Fool contributor Selena Maranjian owns shares of Coca-Cola, General Electric, and Procter & Gamble. Intel, Coca-Cola, and Pfizer are Motley Fool Inside Value recommendations. Coca-Cola and Procter & Gamble are Motley Fool Income Investor recommendations. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Coca-Cola and Procter & Gamble. The Motley Fool is Fools writing for Fools.