Building a strong and durable portfolio filled with great dividend paying stocks is not just about knowing what to look for, it is also about knowing what to avoid. During my recent conversation with Jack Leslie -- current dividend and high-yield portfolio manager for Miller/Howard Investments -- he suggested there are three red flags he is constantly looking for:
1. A high payout ratio, 2. Too much debt and 3. Slow growing dividends. As a portfolio manager for over 25 years, Leslie has found that by focusing on these indicators you can improve your odds of generating consistent dividend income and a better total return. Finding great dividend paying stocks isn't easy, but as Charlie Munger famously said, "Invert, always invert: Turn a situation or problem upside down. Look at it backward." By looking at an investment in reverse and focusing on what you need to avoid, you can efficiently narrow your search -- and, hopefully, find the best companies that will help to build your wealth over time.
Source: Motley Fool
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