by admin on October 12, 2009
As most investors will tell you, finding good stocks to buy can be a daunting task. Just because a company has been around for a long time does not mean it can be considered a quality investment. Look at what happened to General Motors, Bank of America, and Enron in recent memory. At one point in time, all of these companies were considered some of the best stocks to own.
While picking the best known companies doesn’t always translate into a sound investment, there are some ways to find good stocks to buy. One of the best opportunities to find the best investments is to build a list of dividend paying stocks that you can use to further your analysis. Dividend paying stocks come in all shapes and sizes and often are quality investments.
Many of the top dividend paying stocks have similar things in common. Since they are able to distribute a payment back to their investors, it normally means they have a strong financial position and are well managed. Companies that display a strong history of dividend increases for many years are some of the best run organizations in the world. These are usually good stocks to buy when it comes down to it.
Here are some common characteristics of dividend paying stocks that make for some of the best stocks you can invest in.
- Low P/E ratio compared to the rest of the stock market.
- History of consistently raising dividends each year.
- Moderate to strong projected earnings growth rate.
- A dividend yield that remains between 2% to 6%.
Do Your Homework
While using dividend stocks to identify good stocks to buy can really help your investment decisions, you still need to do your homework. For every great dividend stock investment, there is at least one bad stock that you will want to avoid. That is why it is always important to complete your due diligence on any investment before you decide to buy or sell a stock.
by admin on October 6, 2009
One of the hardest parts of becoming a successful dividend investor is filtering out the bad stocks from the good ones. If it were easy, then everyone could run out and start chasing the highest dividend paying stocks based on yield and retire early. Unfortunately, it doesn’t work that way – NOT even close! Building a solid portfolio of dividend paying stocks does not have to be that difficult and there are ways to limit your risks.
One of the best methods for success is putting together a list of dividend paying stocks that can be used as your investment guide. There are plenty of ways to identify your list of stocks, which include running a stock screen, reviewing ETF dividend paying stocks, researching other published lists of dividend stocks, etc. The point is that there is no right way to build your list. The lessons that you learn from the exercise are priceless and can be used to help shape your investment career.
Create a List of Dividend Paying Stocks
Here are 10 great reasons why creating your own list of dividend paying stocks is a good idea.
- Analysis – Creating a list of dividend paying stocks indirectly requires an investor to think about a stock before making a purchase.
- Hidden Gems – There is a strong chance you will come across a dividend paying stock that you had never thought of in the past.
- Diversification – Reviewing more than one high yielding stock will make an investor want to diversify after seeing the various companies that offer dividends.
- Removes Distractions – Working on a building a list of dividend paying stocks can help remove market hype and distractions that go on all the time.
- Eliminates Bad Stocks – Comparing a strong dividend paying stock versus an unhealthy company will force you to pass on the bad stock when making investment decisions.
- Education – Finding the best dividend paying stocks to add to a list will help you educate yourself on investing in high yield securities.
- Sell Signals – Continually updating your list of dividend paying stocks will provide you with early sell signals and warnings on a stock.
- Define Search Criteria – Overtime, you will be able to define and update the search criteria used to identify dividend paying stocks.
- Compare with Experts – Putting together your own list of dividend paying stocks and comparing against the experts (i.e. S&P 500 Dividend Aristocrats) will help validate your analysis.
- Build Credibility – If you have a blog or website, then creating your own list of dividend paying stocks can build your credibility as an industry expert.
Building Your Dividend Investment Plan
Creating a list of dividend paying stocks is not going to immediately make you rich, nor will it reduce any risk in your portfolio. It is only part of an overall strategy that all investors should follow in order to create a trading plan. As with most things in life, having a plan and set of goals is crucial for your success as a dividend investor.
There is no right or wrong way to find your dividend stocks. Maybe you can implement a successful strategy from buying and selling the riskiest dividend stocks available. As long as you have a plan that can be updated periodically and executed, you should have a long career as a dividend investor!
