Cash dividends are the amount of money given by the company to the shareholders. That money is coming from the profits gained by that company. Meanwhile, dividend investors are those investing in the stocks to get an annual payment from it. These investors usually find the highest dividend stocks for their maximum gain.
Why dividend stocks?
Many investors choose dividends stock since it helps them earn a significant amount of passive income for a better standard of living. Many of them use it as their long term investment, particularly during their retirement years.
Doing this in a disciplined manner for a long period of time can make you rich. Successful dividend investors collect the highest dividend stocks. The richer the dividends the more money investors get in their bank account.
What are High Dividend Stocks?
Dividend investing can be a lot harder than it sounds. With various ways to find good and appropriate stocks, pinpointing is not one of them.
Finding the highest dividend stocks can be full of danger since there are various reasons for companies to have high dividend yields. The most common reason is the high yields come as the result of investors avoiding the shares.
Investors avoid the shares usually because they see the possibility of dividends being cut or companies may face troubles soon.
The ways to make sure that high dividend yields and low P/E ratios are not an only illusion.
Ways to find the highest dividend stocks
These are the precautions to help you find the highest dividend stocks while avoiding some of the possible risks.
Dividend ratio
You have to really make sure that the dividend ratio for the stocks does not go above 60 to 70 percent. The ratio that stays at that percentage or bellow means the company has 30 to 40 percent or more of earnings for their business expansion.
Pricing power
Look for dividends stocks which have pricing power. That means the company can increase its prices to offset a high inflation rate. That way you will continuously get cash even when the government prints a high sum of money.
P/E ratio
You have to find the stocks with a P/E ratio of 15 or less. Those stocks will offer you other downside protection whenever the dividend is cut.
Debt to equity ratio
Find the stocks that have the debt to equity ratio of less than 50 percent. That way the company will have at least $1 of net worth for every $1 in debt.
Even in these ways, you have to also consult your financial advisor to find the newest trends.
