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 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. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  2. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  3. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  4. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  5. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  6. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  7. Home & Auto

    5 Mistakes That Make House Flipping A Flop

    If you're just looking to get rich quick, you could end up in the poorhouse.
  8. Entrepreneurship

    Top 10 Features Of a Profitable Rental Property

    Find out which factors you should weigh when searching for income-producing real estate.
  9. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  10. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  6. Can hedge funds outperform the market?

    Generating returns that exceed those provided by the broader market is the goal of nearly every investor. However, the methods ... Read Full Answer >>

You May Also Like

Trading Center