Getting income from your investment portfolio is hard these days, and the immediate reaction to the tragedy in Japan has been for yields of T-notes to fall back down again. The solution could be in a portfolio of large, well established firms that pay high dividends. Ideally, you would want dividend companies that not only continue to provide regular dividend checks, but ones that increase them over time. The best safety measure for a dividend is a reasonable payout ratio. Very few companies are able to pay out everything they earn and still grow, and if the payout ratio gets up into the 70’s or 80’s the dividend tends to be vulnerable.
One can never be sure if a dividend will grow in the future, but firms that have a history of increasing their dividends each year are more likely to continue doing so than non-dividend paying firms are likely to initiate one. Firms that have cut their dividends in the recent past are not the ones you want to look for if you are concerned about the current dividend.
Source: Zacks
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