5 Dynamic Dividend Stocks

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.

Statoil (NYSE: STO), for example, has beaten the S&P 500 by 82 points since October 2006, and currently is rewarding investors with a 5.2% yield. Or consider POSCO (NYSE: PKX), which has topped the S&P by 141 points since April 2005, atop a current 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 140,000-member CAPS community:

Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS as of Nov. 5.

Any one of these quality companies would add some dividend pizzazz to your portfolio, but let's take a closer look at how Motley Fool Inside Value pick Lincoln Electric stacks up.

Does my dividend have a glass jaw?
The last thing we want in a dividend-paying company is the risk that the company will fall off a cliff and have to pull back its dividend. This usually ends up being a double whammy because not only do you lose your dividend payout, but many of the dividend-loving investors who own the stock will run 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.

Lincoln's dividend history is exactly what we want to see from a dividend payer. Not only has the company been paying a dividend for well over a decade, but it has a solid track record of boosting its payout every year. Over the past 10 years, investors have seen Lincoln's dividend rise more than 100%.

Lincoln's balance sheet and cash flow statement further bolster the strength of its dividend. At the end of September, the company had a debt-to-equity ratio of just 12% and carried a substantial $406 million cash stockpile against just $131 million in debt. And if that cash level is going anywhere, it's up. Over the past 12 months the company produced $272 million in cash from operations while shelling out just $45 million in capital expenditures.

On the business front, Lincoln may be a lot of things -- including a world leader in welding products -- but recession-resistant it is not. Since the company serves the manufacturing industry, its business takes the same wild swings that the broader industry does. Fortunately, its conservative financial position means it is well-positioned to skate through even a nasty economic drubbing like the one we're mired in.

What the bulls say
Lincoln has won a resounding five-star rating from the CAPS community, with almost 98% of the ratings coming in as outperforms. Based on the company's solid financial position and some positive early indicators in the manufacturing sector -- most notably the Institute for Supply Management's Purchasing Manager's Index -- I find it hard to argue with the optimism.

CAPS member TheGouch23 chimed in with a strong outperform back in July, noting the company's strong financial position:

Demand for quality products like these will remain steady and Lincoln is in a strong position to maintain its efficiency and earnings. Further, with the economy being what it is, a healthy company has an advantage over competitors just based on its health and the lesser leverage it will require.

Get into the action
You can check out who else has been bullish on these top-rated dividend payers, as well as chime in with your own thoughts by heading over to CAPS.

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.

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