Stocks that pay high
dividends are not all low-risk. You will need to examine some factors
described here, and then decide whether the high
yield comes with acceptable risk. The up side is that dividends may
cushion the effect of a drop in the stock price. The down side is
that the dividends may be rising because the stock price is falling
sharply. Look for stocks that have high dividend rates but
relatively low payouts.
When this is true, the firm is making plenty of profits to pay its investors and also
enough money to invest back into the operation and perhaps expansion of
the business.
You want to pick a company that has a good balance sheet, and a healthy
cash flow. Some investors like the high dividend payouts often
associated with banks and financial institutions. Others like the feeling
of investing in hard assets. For many, Real Estate Investment Trusts, or
REITS, offer an attractive dividend yield and some tax advantages. Look
to see if there's a history of increasing dividend payments, year after
year. ( We find that an easy place to do this is on Morningstar.com. Look
up the stock, select "Charts and Returns", and view the dividend history.
Some of the highest-yielding stocks, if the company's financial health is
solid, can be a fruitful addition to your portfolio. Here are the breaking news headlines regarding some high dividend stocks.
This video recommends some ideas for dividend stocks to buy in this slow-growing economy:
Traditionally, utilities, banks, and some
blue-chip manufacturing firms have been regarded as having a good stock
dividend yield. These companies are more stable and are less likely to
experience negative dividend growth, which becomes an important
consideration when dividend stock yields make up a sizeable portion of a
retiree’s monthly income.
In general, larger, older, and more stable companies offer better rewards
in the form of high dividend paying stocks because they make more money,
which means their stockholders also make more money. It’s a good idea to
read the companies’ annual reports, especially the pages containing data
on their dividend payments for the past five or ten years. This
information illustrates the companies’ commitment to paying dividends,
not treating them as an occasional luxury splurge on their stockholders.