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. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!