Dividend payers deserve a berth in any long-term stock portfolio. But seemingly attractive dividend yields are not always as fetching as they may appear. You should understand just why you'd want to own dividend payers. These stocks can contribute a huge chunk of growth to your portfolio in good times, and bolster it during market downturns. As my colleague Matt Koppenheffer has noted: "Between 2000 and 2009, the average dividend-adjusted return on stocks with market caps above $5 billion and a trailing yield of 2.5% or better was a whopping 114%. Compare that to a 19% drop for the S&P 500."
When hunting for promising dividend payers, unsophisticated investors will often just look for the highest yields they can find. While these stocks will indeed pay out the most, the yield figures apply only for the current year. Extremely steep dividend yields can be precarious, and even solid ones are vulnerable to dividend cuts. When evaluating a company's attractiveness in terms of its dividend, it's important to examine at least three factors: 1. The current yield, 2. The dividend growth and 3. The payout ratio.
Source: Motley Fool
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How To Find Promising Dividends Payers
Posted by D4L | Thursday, February 03, 2011 | ArticleLinks | 0 comments »________________________________________________________________
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