Dividends4Life: Danger for dividend investors — don’t get steamrolled as the economy sours

It is said that income investing is a negative art. Your goal isn’t to pick the winners — it’s to avoid the losers. You want to pick winners, invest in stocks. I suspect most income investors reading this are dividend investors. Dividend investing is similar to bond investing. High dividends are good, but they can also be bad if they are signaling a future dividend cut. Anything much over a 5%-6% dividend in a stock should be viewed with some suspicion.

With regard to dividend investing, the key is not necessarily to buy big, fat dividends, but to buy growing dividends. Most people have it all wrong — they go yield hogging and end up paying the price. Believe it or not, Apple AAPL, -0.48% is one of my favorite stocks. Not because it is a growth stock, but because it is a dividend stock. It has a decent yield, but one that is likely to grow. One day it will have to figure out how to more aggressively return cash to shareholders. I am going to tell you the secret to investing. Are you ready? Invest in companies with dividend growth, and reinvest the dividends on a regular basis. That’s it.

Source: MarketWatch

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