Dividend Stocks Most Likely to Outperform

Had you invested equally among each of the 30 stocks that currently comprise the Dow Jones Industrial Average, from September 2000 to September 2010, your portfolio would have returned 3.15% annually. Had you invested equally among the 42 stocks that currently comprise the S&P 500 Dividend Aristocrats -- an index composed of large-cap S&P 500 companies that have increased dividends for 25 consecutive years -- you would have enjoyed a 8.1% annual return.

n the past we've attempted to select a small portfolio of Dow stocks intended to outperform the collective future performance of the 20 best-performing Dow components. Using the same criteria -- with two new additions -- we've narrowed our universe of Dividend Aristocrats to 10 stocks, each with a reasonable chance of outperforming the composite index: 1.) Each stock must have a liability-adjusted cash flow yield** greater than the yield of a 10-year U.S. Treasury note. 2.) Each stock must have a return on invested capital greater than 10% (using 10-year historical 3.) Each stock must show a positive total return (including dividends) over the past 10 years.

Source: TheStreet.com

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