What's the next piece of a well-diversified portfolio? Cramer said its a high-yielding dividend stock. He said while dividend stocks might not be as sexy as a high flying tech stock, they work. Since 1926, about 40% of the return from the S&P 500 has come from dividends, he said, a fact that few investors realize. He said dividend stocks are not just about safety, they're also about capital appreciation through the compounding reinvestment of those dividends. Cramer said "accidental high yielders," stocks yielding over 4%, are great stocks to own, as are the stocks of companies that have recently raised their dividends, the ultimate sign of strength and confidence in their business.
Be wary of stocks with dividend that are too high however, warned Cramer. He said that sometimes a high dividend can be a red flag. Cramer said his rule of thumb is that a company must earn at least twice its dividend payout for him to consider that dividend safe. "Dividends protect your stocks," Cramer told viewers, and since there's a terrific way to make money as well, "what's not to like?"
Source: Investopedia
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