The Hunt for Yield: Four Strong Dividend Stocks

Market volatility and concerns about rising interest rates are bringing dividend stocks back in vogue. Investors looking for more stability during volatile times are pouring into dividend-paying companies.

The iShares DJ Select Dividend Index (DVY) is up over 2.5% in 2011 -- a strong start for what some analysts believe could be the year of the dividend. Matt McCormick, portfolio manager from Bahl & Gaynor Investment Counsel, which specializes in dividend investments, came by "Breakout" to talk dividends with Macke and Nesto.

"When you have a company that has a strong dividend policy, it's inherently a high-quality company," he says. "A lot of people can manipulate revenues and earnings, but you cannot fake a dividend payment."

And there's no shortage of companies making announcements initiating or increasing dividends this year.

A Tale of Two Dividends

Cisco (CSCO) and Oracle (ORCL) are among the latest to step up to deliver some dividend news to investors. Cisco announced a long-awaited plan to pay a 6-cent per share quarterly dividend in a bid to boost investor confidence. The networking-equipment maker is the worst performer in the Dow year-to-date. On the flip side, Oracle is driving the broader market higher after beating Wall Street's estimates, reporting a 78% rise in fiscal Q3 profit and lifting its quarterly dividend by 20%.

How to Spot the Winners

McCormick's top pick is Procter & Gamble (PG), based on a 3.1% yield and the recently announced deal with Teva Pharmaceuticals (TEVA) to expand the reach of global over-the-counter drug brands. He calls this the "quintessential blue-chip consumer staple stock." For more detail on his other top picks, click on the video above.

McCormick's Dividend Plays:

  • Procter & Gamble
  • McDonald's (MCD)
  • Qualcomm (QCOM)
  • Bank of Nova Scotia (BNS)

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Disclosures: McCormick's firm owns PG, MCD, QCOM and BNS. McCormick has no personal positions in stocks mentioned.

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