10 dividend payers for volatile times

A screening tool and the collective wisdom of an online community help identify companies that pay nice dividends.

By Caps Editor Dec 18, 2009 11:35AM

This post comes from partner site The Motley Fool.


Investing in dividend stocks is a tried-and-true strategy for building long-term wealth. A study by Ned Davis Research found that from 1972 to 2006, dividend-paying stocks returned an average of 10% a year, while their stingier counterparts returned just  4% annually.


In other words, you can generate sizable investment returns, even during times of economic turmoil, if you can identify companies likely to maintain an even increase in their payouts to shareholders.


And many corporations, after paring costs to the bone to weather the recession, are awash in cash. Much of that money will be spent on meeting increased demand as the economy improves, but some will no doubt be allocated to stock buybacks and dividend payments.


We went looking for promising dividend payers and came up with a list of 10.


To find worthy research candidates, we enlisted the stock-screener tool created to help the 145,000 members at MSN CAPS beat the market.


We looked for stocks expected to outperform the market by at least 100 CAPS All-Stars -- those members whose stock-picking acumen places them in the community's 20th percentile.


Each of these stocks had the highest possible five-star ratings by our All-Stars, and each has a dividend yield of at least 1%. Additionally, we screened for companies with market values of at least $1 billion.


Here's our list:


Valero Energy (VLO) is an oil refiner and marketer with a market cap of $9.4 billion. Its shares have a 3.6% dividend yield.


Penn West Energy Trust (PWE) is one of Canada's biggest oil and natural-gas investment trusts, with a market cap of $7.3 billion. Shares have a 9.8% dividend yield.


Bristol-Myers Squibb (BMY) is a maker of pharmaceuticals and nutritional products with a market value of $51 billion. Shares have a 4.8% dividend yield.


Huntsman (HUN) makes chemicals and has a market value of $2.6 billion. Shares have a dividend yield of 3.6%.


NYSE Euronext (NYX) is one of the world's biggest exchange operators, with exchanges in New York, Paris, Brussels, Lisbon and Amsterdam. Its market cap is $6.6 billion. Shares have a dividend yield of 4.6%.


Johnson & Johnson (JNJ) is a diversified health care company with a market value of $178 billion. Shares have a dividend yield of 3%.


BP (BP) is one of the world's biggest oil and natural-gas companies, with a market capitalization of $175 billion. Its American depositary receipts have a dividend yield of 5.9%.


Genuine Parts (GPC), an auto-parts wholesaler, has a market value of $6 billion. Shares have a dividend yield of 4.1%.


France Telecom (FTE) is France's biggest telecommunications company, with a market value of $61 billion. Its American depositary receipts have a 6.6% dividend yield.


Emerson Electric (EMR) makes electrical and electronics products and has a market cap of $31 billion. Shares have a 3.2% dividend yield.


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


Before buying a stock, an investor should read the company's 10-K report and remain mindful of the stock's valuation and the company's fundamentals and growth prospects.


In this environment, look for sustainable earnings and examine the company's debt position and cash flow. And let the collective wisdom of the CAPS investment community help you make better investing decisions.


Related articles at The Motley Fool:


Will this year's hottest stocks stay hot in 2010?


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Don't sell this stock. Ever.

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