Greater Dividends Mean More Landmines To Dodge

Companies are starting to dip more into the corporate cashbox. Some 677 companies hiked their dividends last quarter. All told, the $24.2 billion in dividend increases was an all-time high, and a 27.6% rise from a year earlier, according to Standard & Poor, which tracked 7,000 businesses.

Chasing a stock merely for its dividend though is a sure way to stuff your portfolio with junk. You must tread carefully and use a discerning eye—especially with more companies pumping up their payout to reward investors. Higher dividends can lure you into an investment bound to blow up. “The idea of just going for a stock that has a dividend might put you in touch with a company that can’t support the dividend over time,” says Linda Duessel, equity-income strategist at Federated Investors. “You can’t just look for the highest yielding stock.”

Source: Forbes

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