Dividends4Life: 2 Big Dividends to Avoid

2 Big Dividends to Avoid

Posted by D4L | Wednesday, March 27, 2013 | | 0 comments »

With yields on ultra-safe debt stuck in the gutter, many investors are reaching for higher income through dividend-paying stocks. That's a fine strategy -- as long as you're comfortable with the extra risks involved. To minimize those risks, you won't want to reach too high. Dividend yields that are more than about 4%, for example, are usually worth extra research. You'll also want to screen for dividends that are backed up by strong earnings and sales growth. Ideally, those dividends will have a good chance of rising -- or at least staying put.

Later in this article I'll analyze one dividend stock that I think meets that test. But first let's take a look at two heavy-yielders that don't: Pitney Bowes (NYSE: PBI) and Garmin (NASDAQ: GRMN)... For a more secure -- but still generous -- dividend, take a look at Procter & Gamble (NYSE: PG) . The consumer giant's sales are close to five-year highs, and yet its dividend yield, at 3%, is just a smidge below its five-year average. And as for safety, the company's payout ratio is perched at a solid, but comfy, 50%. Here's a look at how that ratio has been brought down lately as cash flow increased.

Source: Motley Fool

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