NEW YORK (TheStreet) -- Dividend-paying stocks are usually the only equities I recommend when asked by friends what they should have in their portfolio as a long-term holding. Investors have historically increased their odds of success by limiting their allocations to investments with a yield.

Originally, a dividend payment was the catalyst for to invest and risk capital and all stocks that were able paid one. The emphasis on long-term holding shifted towards price speculation as market transaction efficiencies improved, and costs declined.

Many stocks could pay a dividend but currently choose not to. Some are more likely than others to begin. I search for companies that are more likely than average to begin paying dividends. It can take a long time between identifying a likely candidate and the Board of Directors pulling the trigger and declaring one -- however, when you get it right, the payoff can be substantial.

 LULU Cash and Equivalents (Quarterly) Chart

Vancouver-based Lululemon Athletica (LULU - Get Report) designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. The company trades an average of 1.9 million shares per day with a market cap of $6.3 billion.

Analyst opinion is mixed. Most of the analysts surveyed don't believe a buy or sell should be made at this point. Currently, Lululemon has 16 buy recommendations out of 33 analysts covering the company, 14 holds and three recommend selling. The average analyst target price is $57.14.

After changes in leadership and product challenges caused investors to rethink Lululemon as an investment, the shares dropped almost in half since 2013 highs. Despite Wall Street's reservations and the stock's poor performance, the company continues to execute well.

The company has met or beat estimates in 15 out of the last 15 quarters. Lululemon is essentially debt-free and the cash continues to stretch higher.

Analysts estimate the company will earn about $1.89 per share this year and about $2.24 next. Short-sellers have viciously shorted this stock but I think it's reaching a point that the scale is tipping in the favor of shareholders.

As of the last earnings report, about one out of every four shares is shorted. As an active short-seller with years of experience, I know when a short thesis is crowded. Lululemon is one of the most perfect short-squeeze candidates that I've seen in months.

It's the equivalent of a ticking time bomb for short-sellers. I don't think it's a matter of if but when it blows up in the shorts' faces. From a technical analysis, a valid argument could be made a year ago that the shares were ahead of themselves, but that was then and this is now.

Earnings are growing at a rapid clip. The price-to-earnings multiple is pricing flat growth and the number of outstanding shares is stable. The only negative I can find is insiders aren't buying yet. However, insiders are notoriously bad market timers, and if I have to pick a negative this is my first choice.

Athletic apparel maker Nike (NKE - Get Report) pays a dividend yield of 1.2% from a 30% payout ratio. If Lululemon paid 30% on forward earnings, the dividend would be about 65 cents, for a yield of 1.5%.


CTSH Cash and Equivalents (Quarterly) Chart

Cognizant Technology (CTSH - Get Report) delivers high-quality, cost-effective solutions to complex software development and maintenance problems that companies face as they transition to e-business. Cognizant Technology trades an average of 3.6 million shares per day with a market cap of $29 billion.

Price To Book: 4.5

Analysts are in love with this company. Cognizant Technology is sporting 23 buy or strong buy from a total of 25 analysts covering the company, only 2 holds, and not a single sell rating found. Investors are grinning from ear to ear, and analysts are too. The shares have rocketed higher 50% over the last 52 weeks. Analysts are placing a price target of $56.20.

The company has zero long-term debt and its war chest of cash is growing at a fast pace.

The company met or beat earnings estimate in the last 13 quarters. Analysts estimate the company will earn about $2.35 per share this year, and slightly more next. Short-sellers are staying away, and less than 2% of the stock is shorted.

Using a forward payout ratio of 30%, Cognizant Technology's annual dividend would be about 75 cents per share, for a yield of 1.5%.

Other software companies providing related services -- Infosys (INFY - Get Report) and Wipro (WIT - Get Report) -- distribute a dividend yield of 2.8% and 1.5%, respectively. Infosys and Wipro have raised their dividends in the past year, too.

JNPR Cash and Equivalents (Quarterly) Chart

Juniper Networks (JNPR - Get Report) is a provider of Internet infrastructure solutions for Internet service providers and other telecommunications service companies. The company trades an average of 6.4 million shares per day with a market cap of $11.6 billion.

Price To Book: 1.8

Analysts aren't in love with Juniper compared to Cognizant Technology; 21 out of 39 now rate the company a hold, while 16 recommend buying and two recommend selling.

The analysts that didn't call it a buy seriously missed a strong move. The shares appreciated over 35% from a year ago and, based on the price action within the monthly chart, appear to be ready move further. Analysts are calling for a price target of $28.87.

The company's balance sheet is strong with a quick ratio of 2.53 (over 1 is good) and relatively low debt. The $1 billion in long-term debt could easily get paid down or eliminated with cash and short-term investments.

The company met or beat earnings estimate in the last 11 quarters. Analysts estimate the company will earn about $1.62 per share this year and about $2 next. Short-sellers are staying away with about 1.7% of the float short.

Using a forward payout ratio of 39%, Juniper annual dividend would be about 70 cents per share, for a yield of 2.8%.

Cisco Systems (CSCO - Get Report) competes in the same space and pays a 3.1% dividend and is currently paying out about 41% of its income in the form of dividends. Juniper has reduced the number of shares and highlighted its repurchase program during earnings conference calls. Dividends and float reductions often go hand in hand.

At the time of publication the author had no position in any of the stocks mentioned.

Follow @RobertWeinstein

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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