It's rare that you find a stock that's going UP while the dividend is going UP to 16% at the same time. As we've seen all too often recently, when yields get into the double digits, it's because a Financial company has seen its stock slide precipitously and the market has priced in that a dividend cut is inevitable. For instance, New Century Financial was paying a 40% dividend before it became a penny stock a few weeks later.

Of course, there are the Canadian Royalty Trusts and Limited Partnerships and other outfits that carry their own set of tax complexities and are generally tied to one specific sector or commodity. However, the top dividend stock of 2008 is not beholden to the whims of the credit markets, oil prices specifically (while somewhat correlated as you'll learn) or real estate in general (REITs).

The Top Dividend Stock of 2008 is Frontline Limited and here's why:

Frontline (FRO) has seen its share price rocket this year while roughly doubling its quarterly dividend payout over the past 2 years. Frontline basically operates a set of subsidiaries and holding companies to facilitate the transport of oil/bulk/ore (OBO) as well as other hot commodities in demand, around the world. Frontline has a strategy of extensive outsourcing. Ship management, crewing and accounting services are provided by a number of independent and competing ship management companies, staffed primarily with personnel from Russia, India and the Philippines. This outsourcing strategy optimizes its cost structure while it has benefited tremendously for the insatiable global demand for the bulk that it ships. There's certainly something to be said for the correlation with the runup in commodities prices and the pricing power of Frontline itself. However, the management's been relying on both spot pricing and long term contracts and a rapid drop in all commodities classes in the near term is virtually inconceivable by even the most creative thinkers. The slowdown in the U.S. economy has very little impact on Frontline's bottom line, as this is a global player and in cities from Dubai to China, the global buildout is going gangbusters.

The last earnings report from May 22 showed a 52% jump in revenue from the same period last year, facilitating further share increases. The analysts surveyed by the street have continued to raise their forecasts for the year, with the most recent data point showing a consensus of over $6 per share for the year.

Given a 16% dividend rate, no tax complexities to consider and bright prospects into the foreseeable future, I think Frontline looks good in any portfolio.

Here's a recent snapshot of Frontline's meteoric share price rise in the past year.

Disclosure: I got into FRO years ago in my high yield Self-Directed IRA and have seen a nice capital appreciation with rising dividend payouts to boot. My only regret is that I didn't buy more along the way.

Sources: Corporate website, annual reports