What Seniors Should Look For In Dividend Stocks For An Income Investing Portfolio
So, you have decided to make dividend stocks part of your income investing portfolio. Great idea! But before investing your hard-earned savings, you should ensure that the dividend stocks you are investing in have certain characteristics. In your personal income investment portfolios, you should consider 2020 Medicare Supplement Plans and dividend stocks with the following positive characteristics.
- A history of increasing dividends
Find out whether the business has a good track record of paying and increasing dividends. If the dividends are not increasing, then it is definitely not a good income investing. The management should be shareholder friendly. A share-holder friendly management will be more interested in ensuring that the excess cash is returned back to shareholders rather than holding it back to expand the business. There are many mature, established businesses that are not interested a lot in growing. These businesses will definitely give back the excess cash to shareholders because there is little or no room for growth.
- High return on equity with no or little corporate debt
Find out whether a company has a high return on equity, and it should not have huge corporate debt. Otherwise, it might use the extra cash to pay off the debt instead of sending it to you as a shareholder. If the return of a company is high and it has no or little debt, then it will usually do better than an average business. Such a company can provide a good protection against recession and ensure that your dividend checks keep flowing.
- A dividend yield of at least 2% and a maximum of 6%
This simply means that is a business has a $60 stock share, it will pay yearly dividends of between $1.2 and $2.6 per share. This is a good income investing opportunity.
- 50% or less dividend payout ratio
Another positive characteristic of dividend stocks is that it should not pay out all the cash that is made as profit. Instead, it should send some cash to shareholders and then plough back a certain percentage into the business. The best dividend payout ratio should not exceed 50 percent. If a company pays out all or too much of its profit, such a practice can hurt the competitive position of the firm. Based on studies, most of the credit crisis that have been witnessed in the past were due to their high dividend payout ratios.