5 Dynamic Dividend Stocks
By Matt Koppenheffer June 20, 2008 Comments (0)
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Recommendations
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.
National Fuel Gas (NYSE: NFG), for example, has returned more than 100% since August 2005, and it's currently rewarding investors with around a 2.1% yield. Or consider Snap-on (NYSE: SNA), which has returned more than 100% since October 2004, atop a current 2.2% 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 110,000-plus members of our CAPS community:
Company
Yield
CAPS Rating (out of 5)
PetroChina (NYSE: PTR)
4%
****
CPFL Energia
8.6%
*****
Intel (Nasdaq: INTC)
2.5%
****
Cellcom Israel (NYSE: CEL)
8.9%
*****
Yum! Brands (NYSE: YUM)
2.1%
****
Source: Capital IQ, Yahoo! Finance, and CAPS as of June 19.
Any one of these quality companies would add some dividend excellence to your portfolio, but I thought I'd kick off further research with a closer look at Inside Value favorite Intel.
Dependable dividends
As we know, not all dividend payers and dividend payouts are created equal. For that reason, it's important to make sure that the dividend you're expecting isn't about to take an extended vacation with the dodo bird. To figure this out, I like to look at the prospects for the company's business, the company's history of paying dividends, and the sustainability of the current dividend.
Fortunately, most people reading this are likely very familiar with Intel's business. As a world leader in semiconductors and microprocessors, it has a tremendous business and an enviable brand. Though it does face competition, its primary competitor, AMD (NYSE: AMD) ... well, let's just say it's been through some shaky times. And though tech companies aren't typically known for their dividend payouts, as the table above shows, you can now collect a 2.5% dividend for holding Intel stock. And hey, that yield is nearly as much as a one-year treasury.
Looking at the dividend, it's notable that though Intel has been paying some dividend since 1992, the payout didn't even break the $0.10 level until 2004. Since then, the dividend has been a dependable part of shareholder returns, and it's been raised every year. However, this is hardly the dividend history of many of the hardcore dividend payers.
Digging into the financials, though, there seems to be little reason to be concerned about the future of the dividend. Intel produces a healthy amount of cash and has to spend a relatively small portion of it on new capital equipment. This leaves plenty of dough to continue paying -- and growing! -- the dividend, not to mention buying back billions of dollars of stock.
On CAPS, the stock may not have a five-star rating, but it can still claim 5,000 bullish investors versus just 496 bears. One recent bull, CAPS All-Star DarkToast, isn't expecting to get rich from the stock, but thinks it's a solid bet to outperform the market:
This stodgy old stock still has some life in it. While the days of $60 a share are likely only in the past, I expect Intel to beat the S&P over the next 5 years. With the best in the world server and desktop chips, growing networking market share, and very interesting new embedded processors Intel should see some healthy growth.
In addition I think it is likely that Tech stocks will lead the way when the economy eventually turns around. Not that I am holding my breath...
You can check out who else has been bullish on Intel, 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.
More CAPS Foolishness:
7 Highly Rated Stocks on Sale
7 Must-Read Stock Blogs
7 Stocks Defying the Doubters
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Snap-on and National Fuel Gas are Motley Fool Income Investor picks. Intel is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletters today, free for 30 days.
Yankees fan and Fool contributor Matt Koppenheffer hopes the Yanks can create some fireworks for the last year at Yankee Stadium, and has his fingers crossed that the Cowboys will never get back to the top again. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is a true investing dynasty.
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