Selection of Stocks

Typically, investors look for high dividend-paying stocks that can help them enjoy a steady income over a medium to long term. But to pick such stocks, one needs to filter through a big pool of companies that pay high dividends. Investors, therefore, should check the roots of such companies through a thorough fundamental analysis and the future potential, as these broadly constitute the driving factors to ensure a secured and stable dividend over time.

Dividend Yield

The companies that offer above-market yields are generally selected by income investors. Dividend Yield, expressed in percentage, represents an annual dividend amount per share to the price per share for a particular company. Though higher yields are generally seen as an attractive measure to the investors’ buying decision, they need further assessment to gauge the underlying fundamentals.

Dividend Cycle

The interval cycle of dividend payments also plays a key role when an investor is greatly dependent on dividend income. A company may pay dividend yearly, half-yearly, quarterly or even monthly. It is worth to check the number of times the company pays dividends in a particular year and the franking credits awarded with it.

Value versus Growth and Industry Purview

Dividend represents a distribution of a reward stemming from a company’s earnings to its shareholders. It is prudent to see that whether the industry in which the company operates has the potential for continued growth. The companies deeply involved in research, development and innovation, like biotech or IT companies, may opt for business-driven investments for further growth over dividend payments. However, some exceptions to this concept do exist and need to be understood at company level as well as industry level.

stocks under scrunity by investors

Dividend Stocks Report

Investing in dividend-paying stock is a smart way of accumulating wealth without getting the hands burnt! The financially healthy companies pay consistent dividend that ensures a secured income to investors over the long haul. Generally, in a highly-volatile stock market, dividend stocks are one of the most appealing investment options with lower risk and the constant returns.

Investors could also mint money from the power of compounding through reinvesting the dividends to purchase additional shares of these companies. It often gives a win-win situation to investors when the stock prices of the companies spike up over the period of time based on their solid fundamentals.

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