10 Top-Rated, Dividend-Paying Stocks
By
Vincent Mao
Investor’s
Business Daily
Earning a few extra percentage points on top of any capital appreciation may be the financial equivalent of icing on the cake. But don’t buy a stock just because it’s dangling a dividend in front of you. One look at some of these companies’ price charts or earnings records will make most investors run for cover.Also
be aware that company-specific news or even general market weakness could make a year’s worth of dividends disappear in a heartbeat. With
that said, focus on firms that deliver superior earnings growth. That’s key to a stock’s price performance. It’s a company’s ability to grow profits quarter after quarter and year after year that will ultimately fuel a stock’s move. Firms
that pay large dividends tend to be more mature, their best growth periods behind them. In
this week’s list, we give you 10 highly-rated stocks that pay respectable dividends. These firms have strong track records of profit and sales growth. They also have been solid price performers with good institutional support. We
screened for companies with Composite Ratings of 90 or higher, ensuring that the stocks on the list are among the top 10% of performers right now. IBD’s Composite Rating represents a powerful combination of fundamentals and leading price performance. It combines all five IBD SmartSelect Ratings into one comprehensive score. To
ensure that the companies meet all our criteria of strong sales and earning growth, and leading price performance, they all have Earnings Per Share (EPS*) and Relative Price Strength (RS**) Ratings of 70 or higher. Only
stocks with Accumulation/Distribution Ratings of “C” or higher were included in the list. This rating tracks the amount of institutional buying (accumulation) and selling (distribution) in a stock over recent months by looking at daily price and volume changes. Price rises on above-average trading help lift the Acc/ Distribution Rating, while declining price on above-average volume hurt the rating. The higher the letter rating, the more that is being purchased by the “big guns.” And since professional investors drive the price of stocks, this is a good sign for investors to consider following suit. Lastly,
the current price of the stocks had to be at least $10, and average daily volume had to be 200,000 shares or higher. *
The Earnings Per Share Rating measures a company's earnings growth over the last five years. Then the percentage change in the last two quarters' earnings vs. the same quarters a year earlier is combined and averaged with the five-year figure. The result is then compared to all other companies in Investor's Business Daily's stock tables (not, as some people think, to other stocks on the same exchange or stocks in the same industry group) and rated on a scale of 1 to 99, with 99 being best. **
The Relative Price Strength Rating that appears for each stock is calculated by comparing its price change over the past 12 months to that of all other stocks in the tables. Results are rated on a scale from 1 to 99, with 99 being best. An RS Rating of 99 is the highest possible and means the stock has outperformed 99 percent of all stocks in the past 12 months. An RS Rating of 1 means nearly all other issues have done better. Market leaders usually rate 80 or higher. Back
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