Owning strong companies that pay great dividends can provide growth and income in your portfolio at the same time. Using this strategy, you can receive consistent dividends while continuing to see your portfolio increase in value.

To find companies that pay strong dividends and have potential for strong growth, look at the consistency of the dividends over a period of time, the companies' ability to pay those dividends and the price of stock.

Three companies that come across as solid dividend payers with strong growth potential are Frontline (NYSE:FRO), BP Prudhoe Bay Royalty Trust (NYSE:BPT) and North European Oil Royalty Trust (NYSE:NRT).

Frontline Continues To Deliver
Too often, investors overlook the fact that having strong dividends and growth can create huge returns for your portfolio. Such is the case with Frontline. The bulk shipping company is paying a dividend of $12, or 35.8%. The recent market selloff has caused shares to fall to an attractive level with a forward price-to-earnings ratio of 6. Second, the company has a seven-year history of paying consistent dividends and raising them. (For more on the value of dividends, read Dividends Still Look Good After All These Years.)

Combine this with the fact that shares hit a 52-week low just last week, and we have all the ingredients necessary for a company that can deliver strong growth and rising, consistent dividends over the long term. While many are unsure what to do, dividend-oriented investors are continuing to pick up shares. By doing this, they can wait until the market realizes the great valuations and provides them with growth. While they own the stock, they will continue to collect the strong dividends as well.

BP Prudhoe Bay Looking Attractive
A royalty trust is not the same as a stock, but it is a way to receive cash flow. Not long ago, when everyone was thinking that gas prices would reach $5 a gallon, BP Prudhoe Bay hit an all-time high. Since that time shares have sold off, and the trust is looking attractive once again. It is trading at a forward P/E ratio of 7. The distribution from this royalty income trust is phenomenal, paying $11.75, or 16.2%. The trust has a history of paying and raising its dividends going all the way back to 1989.

What all this tells us is that we have a great growth-and-dividend play that the markets have brought down to attractive levels once again. It's only a matter of time until shares rebound to their former levels. Those involved will get the growth and great dividends when this happens.

North European Oil Royalty Trust Paying A Great Dividend
This trust is paying a great dividend of $3.56, which is a yield of 14.8%, and has upside potential as well. North European and Prudhoe Bay both have paid and raised their dividends for many years, and both have pulled back to long-term support levels. This means that they continue to pay strong dividends, and in spite of oil prices dropping, the price of each share has held its own. It would not be surprising to see the strong dividends continue from both and, potentially, long-term growth as well. (For more on these types of investments, read Drilling For Big Tax Breaks.)

Bottom Line
Clearly, it is possible to continue receiving growth and income without being overly aggressive. By waiting for the markets to bring about attractive long-term valuations, dividend-oriented investors can realize some nice gains and enjoy consistent, strong dividends while they own the stock. When you put these two factors together, your overall return will be much higher compared to market averages.

Like the idea of combining consistent dividends with growth potential? See The Power Of Dividend Growth.

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  9. Mutual Funds & ETFs

    3 Vanguard Equity Fund Underperformers

    Discover three funds from Vanguard Group that consistently underperform their indexes. Learn how consistent most Vanguard low-fee funds are at matching their indexes.
  10. Investing News

    Alphabet Earnings Beat Expectations (GOOGL, AAPL)

    Alphabet's earnings crush analysts' expectations; now bigger than Apple?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center