The Riskiest Dividend Stocks

It's hard to go wrong with dividend-paying stocks.

But they aren't perfect

Good, better, best
Even companies with good payout ratios aren't all created equal. Yes, we want companies with safe dividends -- but we also want companies with growing dividends.

Two companies may have seemingly identical dividend yields, but if one has a history of hiking its payout significantly and frequently, and the other doesn't, the former suddenly becomes far more attractive. These companies recently had similar yields, but very different histories:

Company	Dividend yield	5-yr. avg. div. growth rate
MetLife (NYSE: MET)	2.6%	20%
Sherwin-Williams	2.4%	18%
Raytheon (NYSE: RTN)	2.6%	7%
Wyeth (NYSE: WYE)	2.8%	5%

Data from DividendInvestor.com.

To see why this matters, just imagine buying $10,000 of stock with a 3.5% dividend yield. In the first year, you'll get $350. If that dividend grows by 4% per year for 20 years, it will ultimately amount to a $767 annual payout. But if it grows by 12%, it will become a $3,375 annual payout -- almost five times more, and more than 30% of your original investment.

What to do right now
The riskiest dividend is one that you can't count on. So, pick your dividend payers carefully -- but do pick some, because our downtrodden market currently offers some exceptionally strong yields.

The following candidates that surfaced when I screened for large caps with yields of 2.5% or more, five-year dividend growth rates of 10% or more, and five-year revenue growth rates of 10% or more:

Company	Dividend yield	5-yr div. growth	5-yr. rev. growth
Novartis (NYSE: NVS)	4.6%	15%	11%
CNOOC (NYSE: CEO)	4.2%	23%	25%
MarathonOil	3.1%	16%	14%
General Dynamics	2.8%	16%	12%

Any screen like this is merely the first step toward further research, but these candidates may be a good place to start.