When searching for dividend stocks to buy, finding companies with high dividend yields is important, but it's just part of the process. Dividend yield alone won't tell you much about the quality of a company's dividend. In other words, it's equally important to select companies that have highly profitable businesses that support their dividend payments with cash flow. After all, a company that pays out money to shareholders that it doesn't bring in from cash flow is in an unsustainable situation. These types of companies often cut their dividends, which is the worst possible outcome for dividend investors.
With that in mind, if you're in the hunt for dividend stocks, finding companies with the best balance sheets is a great start. Analyzing a company's credit rating can tell you a lot about its financial position, and its ability to pay dividends to shareholders. That's why three companies with AAA-credit ratings from Standard & Poor's, which are Johnson & Johnson (NYSE: JNJ), ExxonMobil (NYSE: XOM), and Microsoft (NASDAQ: MSFT), are excellent candidates for dividend investors.
Source: Motley Fool
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