Cashing in on Dividends

Stocks featured in this article are: McDonalds Corp. (MCD - Analyst Report), Republic Services, Inc. (RSG - Analyst Report), Raytheon (RTN - Analyst Report), Sunoco, Inc. (SUN - Analyst Report), and Waste Management Inc. (WMI).

There has been a lot of talk about dividends lately.

Unfortunately, much of the talk is about who's going to cut theirs.

We've all read or heard about mainstream companies suddenly deciding to slash dividends or cut them altogether.

Pfizer is one example, although they were apparently trying to finance their purchase of Wyeth. But regardless of the reason, the investor who was told his dividend would be slashed by 50% was likely none too happy.

Most of the bad news however has come from the financial sector, where companies have been forced to stop their payouts.

But there's no reason to quit looking for good stocks with good dividends.

Smaller growth companies will typically not pay a dividend as they pour all their money into growing their business.

However, larger companies with solid earnings - but without the aggressive growth rates (or aggressive growth rate opportunities) that may have marked their earlier years - will often reward investors thru dividend distribution (i.e., paying out a portion of their earnings to shareholders).

Many of these companies probably have solid cash positions and generate great earnings, but lack the kind of earnings growth that many investors crave.

But make money they do, and they pass a portion on to their investors.

In this week's screen, we're going to look for stocks with good payout ratios and a track record of excellent growth and payment history.

• Zacks Rank
  This will give us Zacks #1 Rank, Zacks #2 Rank and Zacks #3 Rank companies. But will exclude Zacks #4 Rank and Zacks #5 Rank companies, which are Sells and Strong sells.

• 5 Year Historical Growth Rate >= 10%
  We want to see a history of solid growth.

• Next 3-5 Year Projected Growth Rate >= 10%
  (In addition to a track record of solid earnings, it's important to have a successful future of solid growth as well. (Otherwise, your dividend could be in jeopardy.)

• Average Dividend Yield >= Average for the S&P 500
  (Above average market yields we're looking for.)

• Current Dividend Yield >= 5 Year Average Dividend Yield
  (We're also insisting that their current yield be greater than their average dividend yield.)

• Sector Finance (that means NO finance companies)
  Because of the shaky environment with financial companies, we're going to exclude the finance sector entirely.

Of course, this screen will not preclude that a company will decide to cut their dividend in the future. But these additional measures should help us find some of the best dividend paying companies with a history of success.

Here are 5 stocks from this week's screen:

MCD - Analyst Report McDonalds Corp.
RSG - Analyst Report Republic Services, Inc.
RTN - Analyst Report Raytheon Company
SUN - Analyst Report Sunoco, Inc.
WMI Waste Management, Inc.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Read the full analyst report on WM

Read the full analyst report on RSG

Read the full analyst report on MCD

Read the full analyst report on SUN

Read the full analyst report on RTN