Rules when Researching Dividend Stocks.

Four rules for finding dividend shares

1. High (but not excessive) dividend yield

Yield is an important dividend metric because it tells you the percentage of how much a company pays out in dividends each year relative to its share price. High yields are obviously appealing, but caution is needed. When the market anticipates a dividend cut, the share price will fall, which actually pushes the yield higher - but this can be a trap. So it pays to be wary of excessive yields. A sweet spot for me is between 4% and 5%

2. Safety in size

Part of the appeal of dividend stocks is their financial strength. Large size and scale means that their vast cash flows tend to be predictable. It gives them the resilience to maintain their dividends through the economic cycle. And while large companies aren’t immune from making dividend cuts, their financial strength is an appealing safety factor for income investors. Also take in to account the price of any commodity a company is producing and track that as well. a Gold miner will make more profit if there is a high gold price and less if the gold price falls. this is the case for oil especially.

3. Dividend growth

Another important marker for income investors is a track record of dividend growth. Progressive dividend growth can be a pointer to payout policies that are being handled carefully by management. Rather than aggressively dishing out earnings, dividend growth companies tend to have more modest yields, but are better at sustaining their payouts

4. Dividend cover

Attractively high yields obviously turn heads - but it’s important to know that a dividend is affordable. Dividend cover is a go-to measure of a company's net income over the dividend paid to shareholders. It’s calculated as earnings per share divided by the dividend per share and helps to indicate how sustainable a dividend is.

Dividend cover of less than 1x suggests that the company can’t fund the payout from its current year earnings. i look for a dividend cover of 1.5 and higher. the higher the better. learning to work out dividend cover for a company is essential for any investor.

Disclaimer: Any information on this channel is not to be taken as financial advice. The opinions expressed on this channel are not necessarily the opinions of the host. i am not a financial adviser and if you are seeking financial advice. please consult a professional. also any research done by myself or others used in or on this channel may or may not be accurate. this also extends to the opinions of the host and any guests. all material on and in this channel is for education and entertainment purposes only and i can not confirm or deny any of this.
all media and information used on this channel are claimed under fair usage