Consider running a diversified portfolio of stocks that pays you to invest, in the shape of dividends. Do you own a credit card? Well you then probably understand how fast interest expense can mount up, becoming an economic nightmare. The contrary is true with dividend investing and how quickly your dividend income will add up. Even better, when dividend paying companies you own increase their dividend payouts, your income increases! There are lots of questions to ask when purchasing dividend paying stocks some of which are:
The length of time has the company paid dividends ? (Check the dividend yield and history)
You will find amazing dividend paying companies such as Colgate Palmolive (NY:CL) (yield 2.0%) which have paid dividends each year since 1895 or Proctor & Gamble (NY:PG) (yield 1.9%) since 1891. These tremendous dividend histories confirm the companies’commitment to paying dividends. Normally dividend histories of 5 to 10 years plus are believed good.
Are the dividends sustainable ? (Check the dividend payout ratio)
You will find companies which have good dividend payout ratios like 3M (NY:MMM) which pays out 40% or Johnson & Johnson (NY:JNJ) which currently pays out 38% calendário. The payout ratio is really a tool that helps investors determine if the company has sufficient funds for maintaining dividend payouts. Normally a payout ratio below 70% is acceptable.
Are the dividends growing ? (Check the dividend growth rate)
You will find companies, such as Sysco (NY:SYY) which have raised its dividends by over 400% during the 10 year period from 1995 to 2005. Sterling Bancorp (NY:STL) raised its dividends over 500% during the exact same 10 year period! Normally dividend increases that exceed inflation are believed good.
A potential investing strategy is to get a diversified basket of good quality dividend payers which consistently raise their dividends. Reinvest the dividend income you receive to get more shares and repeat the cycle to produce your own dividend compounding money machine.
DividendInvestor.com provides investors worldwide with the essential proprietary mining tools to screen stocks by dividend yields, payout ratios, growth rates, histories and additional criteria. Visit now so you can begin to identify your own diversified basket of dividend winners!