Strong fundamentals make these dividend stocks to buy even more attractive
When it comes to investing in dividend stocks, some investors focus mainly on yield. This can sometimes lead to investing too heavily in stocks that, while offering a high yield, could end up becoming dividend traps, whether from cutting/suspending their dividends, and/or from shares declining in value, outweighing the large payouts. Other investors focus on dividend growth. They seek to buy and hold stocks with a history of increasing their payouts steadily over time. This strategy also has its flaws.
Namely, there are many dividend-paying stocks that are able to raise payouts above their rate of earnings growth for some time, but end up hitting a wall once their payout ratios start approaching the 100% mark.
With this in mind, a strong dividend investing strategy may be to focus on high-quality names that score well on several dividend-related metrics. In other words, besides yield and dividend growth history, payout ratios/dividend coverage, as well as the underlying strength of the company’s business, should be taken into consideration, as well. Applying this filter brings us to names like these seven top dividend stocks.
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