Bull Market or Bear, These 7 Dividend Stocks Will Boost Your Portfolio

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Markets have been nothing if not turbulent since mid-summer. The S&P 500 is down almost 14% since the start of May, and with debt problems in Europe, there's no telling how long it'll be until we get back to where we were then.

But savvy investors who use dividends to buoy their portfolios have slept well despite the turbulence. If anyone had a doubt about the power of dividends, they need only read Jeremy Siegel's The Future for Investors, where he writes: "Dividends matter a lot. Reinvesting dividends is the critical factor giving the edge to most winning stocks in the long run."

Today, I share with you seven super-dividend stocks that all share the following three key attributes:

1. Fat dividend yields
All seven of the stocks that I've hand-selected have yields over 3%. Set your account up for a dividend reinvestment program, and you'll continue to add shares without having to move a muscle.

Company

Dividend Yield

Intel (NAS: INTC)

3.8%

Arcelor Mittal (NYS: MT)

4.5%

Banco Santander (NYS: STD)

8.2%

Cooper Tire & Rubber (NYS: CTB)

4.1%

Navios Maritime (NYS: NM)

7.2%

Eaton (NYS: ETN)

3.8%

Seagate Technology (NAS: STX)

6.4%

Source: Yahoo! Finance.

2. Opportunity for growth
With dividends like these, the average investor -- especially those nearing retirement -- wouldn't need much appreciation in share price to turn a nice profit.

But we here at the Fool don't aim to be average investors. So I went out and made sure that these seven stocks not only had large dividends, but that they also had potential for growth. I looked for that by delving into their PEG ratios.

In the most basic sense, a PEG ratio under one represents a stock that is priced below its expected growth. The closer the PEG is to zero, the more underpriced the stock. Take a look at how our seven stocks stack up.

Company

PEG Ratio

Intel

0.97

Arcelor Mittal

0.32

Banco Santander

0.50

Cooper Tire & Rubber

0.81

Navios Maritime

0.34

Eaton

0.85

Seagate Technology

0.96

Source: Finviz.com.

While some companies, like Arcelor Mittal and Navios Maritime, have wildly low PEG ratios, all of these stocks look to be undervalued at today's prices. This means that along with high dividend yields, you could benefit from appreciating prices as well.

3. Dividends that will stick around for a long time
But let's be honest, while high dividends and the chance for price appreciation are nice, it means nothing if the company isn't paying out a sustainable dividend.

One of the most popular metrics for checking on a dividend payer's sustainability is the earnings payout ratio, which essentially measures the amount of earnings a company dedicates to paying out dividends. As the theory goes, the lower the payout ratio is, the more sustainable the dividend is.

Company

Payout Ratio

Intel

31%

Arcelor Mittal

31%

Banco Santander

51%

Cooper Tire & Rubber

24%

Navios Maritime

38%

Eaton

37%

Seagate Technology

17%

Source: Yahoo! Finance.

In their book Million Dollar Portfolio, David and Tom Gardner suggest that you should hold only stocks with a payout ratio of less than 65%. Clearly, these seven stocks pass that bar with flying colors.

What these numbers really means is that should times get tough, they'll have no problem continuing to pay their dividends; and should things go well, they have plenty of room to raise their dividends.

Don't stop now!
If you're looking for some dividend ideas, consider 13 names from a free report from The Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," including one that a senior retail analyst calls "the dividend play of a lifetime." Tens of thousands have requested access to this report, and today I invite you to download it at no cost to you. Get instant access to the names of these 13 high yielders. It's free!

At the time this article was published Fool contributor Brian Stoffel owns shares of Intel. You can follow him on Twitter at @TMFStoffel. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position on Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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