Investors can put together a package of dividend yielding stocks which fit their individual investing styles. For 2011, we've selected a sampler of some potent large-cap stocks which pay attractive dividends. Here are the selections and our reasons for choosing them.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

About our Approach
We've selected a batch of stocks which have historically strong businesses and have been steady dividend payers. There are degrees of risk even in something as relatively low-risk as income stocks. The group we've selected are not necessarily the highest yielders, as those stocks often carry higher risk. Large, stable and yes, probably dull (as in unlikely to have a dividend crippling business event) is the theme for the selection of these stocks. (For more, watch our video What Is A Dividend?)

Calling iPhone Users
Verizon Communications
(NYSE:VZ), which currently yields 5.7%, is one of the twin mega-telecoms along with AT&T (NYSE:T) and is often purchased for its yield by investors. Verizon is expected to offer iPhones next year. Estimates are that it may land as many as 10 million activations when Verizon Wireless begins selling the iPhone. This will be a healthy addition to Verizon's revenue stream. Why choose Verizon's dividend over AT&T? It's a bit more of a dynamic company.

Is Big Pharma a Bad Investment?
Our next candidate is drugmaker Merck (NYSE:MRK). It's true that some big pharma stocks have performed poorly in the last decade, the stronger companies are positioned to do better. Merck's underlying business has healthy margins and cash flow generation. The stock currently yields 4.21% and sells at a forward PE of 9.65. Even if you scale back the revenue and earnings projections the stock looks cheap.

Recovery in the Oil Patch
After the tragic BP (NYSE:BP) oil spill in the Gulf of Mexico in April, Conoco Phillips (NYSE:COP) and other integrated oil company stocks such as Chevron (NYSE:CVX) tailed off. Conoco Phillips yields 3.36% and sells for less than nine times earnings. Is Chevron worthy, too? Yes, but for diversification, we're choosing just one oil stock in the group. It's a close call, but Conoco Phillips' stock is slightly cheaper. (For more, see Why Dividends Matter.)

Going Global with Consumer Products
There are some worthwhile U.S.-based consumer products businesses such as Colgate-Palmolive (NYSE:CL), but we're going to choose U.K.-based Unilever Plc (NYSE:UL) with its 3.65% yield instead. Unilever has a wide mix of businesses, and the stock got a recent enthusiastic analyst upgrade. The stock is a bit pricey now, but it is projected to continue its earnings rebound.

Simply a Great Company
The final selection in our dividend group is Coca Cola (NYSE:KO). While the current yield is only 2.71, investors will still get a share in a company which continues to grow its earnings despite economic headwinds. The underlying growth and value of the company makes its dividend as solid and stable as any. (For more, see The Power Of Dividend Growth.)

The Bottom Line
The package of five dividend paying stocks we've selected for 2011 features strong, stable companies which will pay investors while they wait for the stocks to appreciate in value. We've picked a combination of stocks that pay attractive yields along with offering underlying fundamental business strength. Payments from these strong performing companies can add up greatly over time. (For more, see How Dividends Work For Investors.)

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

Related Articles
  1. Stock Analysis

    Is Now the Right Time to Buy Brazilian Stocks?

    Examine the current state of the economy of Brazil, and learn why there may be some reasons for investors to look for a rally in Brazilian stocks.
  2. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  3. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  4. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  5. Investing Basics

    How to Think About Seasonality Trends

    Investors benefit when company research incorporates seasonality trends that predict relative strength and weakness throughout the calendar year.
  6. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  7. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  8. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  9. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  10. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  1. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  2. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  3. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  4. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  5. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  6. 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 >>

You May Also Like

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!