My colleague Christine Benz once explored the question, should you manage your portfolio for income or total return? Her conclusion: Who says you have to choose? Savvy dividend investors have known this all along; investing in high-quality dividend-payers allows you to get the best of both worlds.
But the key here is "quality." sometimes the
highest yields portend danger. Those juicy dividends are likely to be cut,
particularly if the payout constitutes a large percentage of earnings. That
leaves only a small buffer to sustain those payments if earnings fall. (A
stock's payout ratio can help you get a handle on this.)
Rather than homing in on the market's juiciest yields, the
Morningstar US Dividend Growth Index looks for companies whose cash flows have
translated into a rising payout. Companies that are focused on growing
dividends tend to be higher quality, cash-rich businesses that hold up well in
down markets, participate in up markets, and are capable of excess returns over
a full market cycle.
OHI is very nice juicy div monster.
ReplyDelete