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. 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 our Motley Fool Income Investor service's mission.

Coca-Cola (NYSE: KO), for example, has returned 25% since March 2009, and it's currently rewarding investors with a 3.4% yield. Or consider Enterprise Products Partners (NYSE: EPD), which has climbed 99% since May 2004, atop a current 6.8% 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 165,000 members of our CAPS community:

Source: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of June 4.

Let's take a closer look at how these dividend payers stack 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; the lost payout sends many of the stock's dividend-loving investors running 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.

When it comes to dividend history, Medtronic clocks in with a most impressive record. The company has been kicking profit back to shareholders on a quarterly basis since 1977. Intel, meanwhile, smashes the notion that tech companies don't pay dividends, having steadily paid its shareholders for the past 18 years.

ConocoPhillips' track record is a little more complicated, as the company was spun off from DuPont in 1998 and merged with Phillips Petroleum in 2002, but it has a pretty impressive record as well -- it's put cash in its investors pockets every year since 1999.

Southern Copper and NYSE Euronext's dividends, on the other hand, raise some yellow flags for dividend investors. While Southern Copper has reliably paid a dividend for more than a decade, the amount of that payout has bounced around considerably. In 2007, the company paid $2.27 per share; that figure fell to $0.44 in 2009. And though NYSE has been trying to build a dividend track record since going public, it's only been a public company since 2006.

For the most part, all of the companies are in a great financial position to continue paying their investors. Debt isn't a current concern for any of these companies, particularly Intel, which has a mere $2.5 billion in debt against a cash position of more than $16 billion. And for most of these names, there's also plenty of new cash flow pouring in.

We do, though, have to single out NYSE here again, as the company fell into a negative free cash flow position in 2009. And though it was free cash flow-positive in the first quarter of this year, that number fell significantly from the prior year.

And finally, from a business stability perspective, the only companies that we have to watch closely here are Southern Copper and NYSE. Though Southern Copper has grown significantly over the years, its year-to-year performance has experienced some big swings and that's not generally a recipe for a stable, growing dividend. For NYSE, the story is the same as before -- it's still a bit early to tell. The company has a limited public history and it's gone through significant changes through acquisitions.

Going the distance
Though I'm partial to Intel as a shareholder myself, and ConocoPhillips has the best rating from the CAPS community, I'm going to give Medtronic the nod as the top pick of this group.

Sure, the 2.2% yield may not look all that impressive against the other dividends in the group, but the company has grown its dividend by 19% per year over the past five years, so it's unlikely that the payout will just stay put. And with a forward price-to-earnings ratio of less than 11, it looks like investors may be tossing out a good stock just because the rest of the market is choppy.

Last year, KnightofShadows, one of CAPS top-rated members, gave Medtronic a thumbs-up:

The population is aging, and Medtronic is focused on segments that will benefit from an aging populations. It's trading at 1998 levels and is probably good for a double over the next couple of years.

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. 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.

Think your stocks are safe? Look out for these stocks with dangerous exposure.

Intel and Coca-Cola are Motley Fool Inside Value recommendations. NYSE Euronext is a Rule Breakers selection. Enterprise Products Partners LP and Coca-Cola are Income Investor picks. 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 Medtronic. Try any of our Foolish newsletter services free for 30 days.