Dividends4Life: Attractive Dividend Growth Stocks

Attractive Dividend Growth Stocks

Posted by D4L | Tuesday, December 20, 2011 | | 0 comments »

Dividend stocks have many benefits. One of them is the empirical evidence linking payout with higher earnings growth which in turn translates into stronger returns. In addition, higher-yielding stocks tend to be less volatile in uncertain markets like today. However, when I look for dividend stock ideas I am not just looking for a high yield, I am looking for companies whose dividend is steadily growing and who are not spending all their money on their dividends as they also need to growth their business!

In order to identify dividend growth candidates, I usually start by looking for companies with the following characteristics:
- Dividend yield in excess of 2%: I’m investing in dividend stocks to get some yield!
- Payout ratio below 50% to make sure the company has enough money to reinvest in growth.
- Positive free cash flow: to make sure the company has the cash to continue paying its dividends in the short term.
- A debt to equity ratio of less than 50% to avoid companies with too much leverage.
- Growing year over year dividends for the last seven years.
- A dividend growth rate of 5% on average or more per year over the last seven years.

Source: Guru Focus

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