5 Dividend Stocks for Your Watch List

Finding new stock ideas is challenging for all investors, but it's particularly difficult for new investors who may have a limited understanding of key financial metrics and accounting.

Sure, stock screens are great, but they're only as good as their users' input. If, for example, you don't know what "return on equity" or "price to book" means, a screener is of little use.

It's about to get easier
With that thought in mind, we at the Fool combined the investing knowledge of the top analysts and data from our Motley Fool CAPS screener to come up with four preset model screens -- Value, Dividend, Small Cap, and High Growth.

For our Dividend screen, we asked Motley Fool Income Investor co-advisor James Early what he looks for in promising dividend payers. Among other things, he focuses on larger stocks with yields above 3%, strong business models, and four- and five-star CAPS ratings.

That last point is particularly important, because we've found that these highly rated stocks have outperformed the market as a group by 12 and seven points annually, respectively, from November 2006 to July 2008.

And now for the stocks
Using the preset Dividend CAPS screen, here are five stocks you should know about:

Company	CAPS Rating (Out of 5)	Research
BP (NYSE: BP)	****	BP
CNOOC (NYSE: CEO)	*****	CEO
Eli Lilly (NYSE: LLY)	****	LLY
Southern Copper (NYSE: PCU)	*****	PCU
Waste Management (NYSE: WMI)	*****	WMI

Source: Motley Fool CAPS, as of Aug. 26, 2008.

Copyright © 2008 Universal Press Syndicate