How To Choose High Dividend Stocks

They key principle that guides stock investing is yield versus risk. The goal of an investor is to seek the highest yield possible with the least risk. Unless you are a high roller able to dedicate serious capital to high-risk investments, you will have to content yourself with more middle-of-the road options. By comparing top ten lists of high-yield companies, however, it’s possible to earn a few percentage points above CDs and longer term government debt. The price of higher yield, as always, is knowledge of the market and vigilance.

Of the 14,000 equities listed on Standard and Poor’s (S&P) MarketScope advisor, nearly 2,400 provide a pay rate of at least 5 percent. Some companies in times of extreme growth can offer much higher percentages. The thing to remember is that all good things come to an end. When choosing high dividend stocks, a moderate investor is looking for stability as well as payout.

When researching high dividend paying stocks, it is very important to not just choose the highest yield from the list without knowing the history and projections of that company. With the assistance of a broker it is advisable to examine a potential investment’s dividend history. You will want to determine if payouts have been consistent for the last ten years, and if there are certain prevailing patterns to be aware of. It is also important to look into current policies at the company and opinions from the investment community.

There are several systems in existence that gauge a company’s stability by comparing a few factors. Morningstar evaluates 1,700 companies and highlights those that earn 3 percent or more annually and haven’t cut their dividends in the past five years. Furthermore, they cross off companies with high risk factors or internal difficulties. There are many ways to screen existing data to find successful investments. Professionals build their career on designing a technique that meets with success. A new investor, or someone with limited dedicated time, should seek middle-of-the-road options. It is a good idea to increase your risk only as you increase your knowledge of the marketplace.

It is great, in theory, to put your money into high dividend yield stocks and earn a higher rate. Without a good investment strategy and research, which is a long-term time investment, however, the odds are the current marketplace will offer up some unpleasant surprises. The highest dividend paying stocks are often not the best in terms of long-term security and growth. A prudent investor with moderate means will take a middle path that seeks the balance point between high dividend paying stocks and stocks from stable companies with proven track records. By contenting yourself with a few points above average instead of seeking a pot of gold, you can enjoy healthy growth and fewer sleepless nights.