Written by Rebecca Lipman

2012′s rally has so far been very impressive, but a lot of investors are nervous it is running out of steam. If so, 2012 might see investors playing the same strategy so popular in 2011: Dividend stocks.

Indeed, dividend income was a popular choice in 2011, and the heavy demand for it sent stock prices up for more of the higher-yield companies.

So we were wondering what companies might shape up to be the best dividend stock picks for 2012. For ideas, we took a look at valuestockguide's list of dividend companies that all:

1. Pay cash dividends ("Companies that regularly pay cash dividends are typically strong companies")
2. Have a history of consistently increasing dividends (They "generally have strong fiscal discipline and shareholder orientation")
3. Have reasonable valuations (P/E ratio of 15 or below)
4. Have market caps above $30 million.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the first nine stocks mentioned below.



Business Section: Investing Ideas
Here are the top stocks on the list, sorted by dividend yield. Do you think these dividend stocks will offer a nice return in the year ahead? (Click here to access free, interactive tools to analyze these ideas.)

1. International Shipholding Corp. (NYSE: ISH): Operates a fleet of the United States. Market cap of $165.35M. Dividend yield at 7.79%. Dividend growth rate (5 year average) at 43.1%. P/E (TTM) at 3.6.

2. American Greetings Corp. (NYSE: AM): Engages in the design, manufacture, and sale of greeting cards and other social expression products worldwide. Market cap of $555.26M. Dividend yield at 4.62%. Dividend growth rate (5 year average) at 13.4%. P/E (TTM) at 6.5.

3. Harris Corp. (NYSE: HRS): Operates as a communications and information technology company that serves government and commercial markets worldwide. Market cap of $4.60B. Dividend yield at 3.04%. Dividend growth rate (5 year average) at 20.55%. P/E (TTM) at 8.5.

4. L-3 Communications Holdings Inc. (NYSE: LLL): Provides command, control, communications, intelligence, surveillance, and reconnaissance systems; aircraft modernization and maintenance; and government services in the United States and internationally. Market cap of $6.98B. Dividend yield at 2.67%. Dividend growth rate (5 year average) at 19.14%. P/E (TTM) at 7.7. The stock has lost 8.65% over the last year.

5. St. Jude Medical Inc. (NYSE: STJ): Develops, manufactures, and distributes cardiovascular and implantable neurostimulation medical devices worldwide. Market cap of $13.16B. Dividend yield at 2.41%. Dividend growth rate (5 year average) at 80.01%. P/E (TTM) at 12.7.

6. Microsoft Corporation (Nasdaq: MSFT): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap of $245.26B. Dividend yield at 3.07%. Dividend growth rate (5 year average) at 14.87%.Current P/E at 10.59.

7. Southside Bancshares Inc. (Nasdaq: SBSI): Operates as the holding company for Southside Bank that provides financial products and services to individuals, businesses, municipal entities, and non-profit organizations. Market cap of $345.71M. Dividend yield at 3.28%. Dividend growth rate (5 year average) at 15.87%. P/E (TTM) at 9.6.

8. General Dynamics Corp. (NYSE: GD): Provides business aviation, combat vehicles, weapons systems and munitions, military and commercial shipbuilding, and communications and information technology products and services worldwide. Market cap of $25.05B. Dividend yield at 2.83%. Dividend growth rate (5 year average) at 15.36%. P/E (TTM) at 9.3.

9. Intel Corporation (Nasdaq: INTC): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap of $136.11B. Dividend yield at 3.44%. Dividend growth rate (5 year average) at 16%. P/E (TTM) at 10.4.

10. Walgreen Co. (NYSE: WAG): Engages in the operation of a chain of drugstores in the United States. Market cap of $29.90B. Dividend yield at 2.55%. Dividend growth rate (5 year average) at 23.76%. P/E (TTM) at 12.

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

Disclosure: Kapitall's Rebecca Lipman does not own any of the shares mentioned above.

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