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Dividends Don't Lie

Had you bought this company during the 2008 low price of $10, the then-$0.75 dividend was a yield of over 7%. Today you would be collecting a yield of nearly 10% a year and sitting on a gain of around 200%. You won't get anything like that going forward, but you will get a growing dividend from the largest toy company in the U.S. As long as there are children, birthdays and Christmas, Mattel will be just fine.

H.J. Heinz (HNZ) is another solid dividend play today. It yields 3.6%, and that makes it the highest-yielding big-cap food company stock. You can rest assured the dividend is not going away, since products such as ketchup, soup and Worcestershire sauce generate the cash flow. And given how valuable dividends are today, the stock price will get tremendous support if it starts to slip.

I'm also keeping a close eye on Dell (DELL), since the shares continue to slide lower and lower, in the process creating a 3.3% yield. The dividend is new for Dell, so I'd bet the company has no intention of taking it away. In fact, seeing as how founder and CEO Michael Dell has bought $500 million worth of shares for himself, he has every incentive to boost the payout.

Dividend-paying stocks are cash-flow-producing companies. In the long run, value is created by cash-flow growth, and the perennial dividend-paying companies have demonstrated that they can generate cash flow and pay dividends in any environment.
At the time of publication, Gad had no positions in stocks mentioned, although positions may change at any time.

Sham Gad is the managing partner of Gad Capital Management, a value-focused investment firm based in Athens, Ga. Gad has written extensively for The Motley Fool and was a securities analyst for UAS Asset Management, a small value investment fund in New York City, in 2007. From 2002-2005, Gad managed assets for the Gad Investment Group.

Additionally, Gad has just released a new book, The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett. He earned his BBA and MBA at the University of Georgia. Gad appreciates your feedback; click here to send him an email.

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