Dividend-paying stocks need earnings sufficient enough to support paying investors, so finding companies with growing earnings per share over the last five years should give some insight into the sustainability and potential growth of future payouts. Beyond that, you should evaluate if the following stocks will give you the best return given your risk and time horizon. Payout ratios will let you know the percentage of earnings going out as dividends, but payout ratios fluctuate with quarterly earnings reports and thus cannot be used as a predictor of future dividend policies. These companies have a track record of growing earnings over the last five years, and they have solid dividends.

IN PICTURES: Learn To Invest In 10 Steps

Pharma and Biomedical

Company Dividend Yield Average EPS Growth 5 Years
AstraZeneca PLC (NYSE:AZN) 5% 18.7%
Bristol Myers Squibb (NYSE:BMY) 5% 7.5%
GlaxoSmithKline (NYSE:GSK) 4.9% 5.6%
Emergent Group (AMEX:LZR) 5.4% 51.6%
Merck & Co Inc. (NYSE:MRK) 4.2% 8.4%
Lilly Eli & Co (NYSE:LLY) 5.4% 11.7%

Astrazeneca is a biopharmaceutical company that markets and manufactures prescription medicines, and its revenues and earnings have been growing at a fast pace in recent years. The company's current ratio sits at 1.35, above the S&P 500 average, and cash flow from operating activities grew 34% from $8.7 billion in 2008 to $11.7 billion in 2009. Astrazeneca is set to report on April 29, 2010. (Look at stocks in a different sector, read Top Price-To-Book Picks.)

AZN Revenues (Millions)

2009 2008 2007
$32,804 $31,601 $29,559

AZN Diluted EPS

2009 2008 2007
$5.19 $4.20 $3.74

Healthcare
Healthcare stocks such as Bristol Myers Squibb (NYSE:BMY), GlaxoSmithKline (NYSE:GSK) and Merck & Co Inc. (NYSE:MRK) all report earnings over the next two weeks. The impact of the healthcare reform is still to be revealed, but Merck has dropped 12% over the last three months. All four except Emergent Group have seen over 25% increase in share price in the last year, so these stocks definitely have momentum on their side.

Bottom Line
Although all of these are dividend-paying stocks, they reside in the healthcare or pharma industry, which might not be the best sector in a bull market like the one we've seen over the last 52 weeks. Since last April the S&P 500 is up over 45%. Low beta stocks are not going to participate in the gains of a climbing market. On the other hand, a solid dividend and earnings to back it up might be just what you are looking for.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  2. Investing Basics

    10 Habits Of Successful Real Estate Investors

    Enjoying long-term success in real estate investing requires certain habits. Here are 10 that effective real estate investors share.
  3. Investing Basics

    5 Types of REITs And How To Invest In Them

    Real estate investment trusts are historically one of the best-performing asset classes around. There are many types of REITs available.
  4. Investing Basics

    5 Simple Ways To Invest In Real Estate

    There are many ways to invest in real estate. Here are five of the most popular.
  5. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  6. 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.
  7. 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?
  8. 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?
  9. 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?
  10. Retirement

    Dollar Shave Club Review: Is It Worth It?

    Learn about the business model of the Dollar Shave Club, and find out whether the razor subscription company is a worthwhile investment.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  3. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  4. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  5. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  6. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center