Dividends4Life: Deadly Dividend Stocks to Avoid

Deadly Dividend Stocks to Avoid

Posted by D4L | Monday, May 30, 2011 | | 0 comments »

Dividend investing is all the rage. And what's not to love? Getting those four (typically) payments each year feels great for investors. It gives you a tangible affirmation that you're actually getting something out of owning those little pieces of paper sitting in your brokerage or retirement accounts. And beyond the positive affirmation those payments provide, research indicates that companies that pay dividends outperform the market. All in all, dividend investing seems likes an ironclad road to riches.

A high yielder can become deadly when its payout is so high, the company can't afford it anymore. When a company's payout ratio begins to rise about 75%, it's worth taking note. Such a high payout ratio means that the company in question pays more than three-quarters of its income out to owners. While this might sounds like an investor's dream (and not always a negative), such practices can also give companies very little breathing room in running their businesses, especially since evidence indicates firms will often go to destructive lengths to avoid cutting their dividends.

Source: Motley Fool

Related Articles:
- Finding Low Risk Dividend Stocks
- Why We Are Dividend Growth Investors
- What Determines A Dividend Stock's Yield
- Managing Risk With Dividend Stocks
- 9 Stocks With a Sustainable Dividend

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