23/11/2023
Dividend paying stock
In Kumul Investor's recent poll, the top choice among investors for where to invest $100,000 was dividend stocks. Let's break down the key factors to consider when you're on the hunt for those money-making dividend-paying stocks or ETFs.
If you dream of a steady second income or securing your retirement funds, dividend stocks can be your golden ticket. They're like a financial two-for-one deal. Here's why:
1. Dividend History:
Look for companies that have a strong track record of paying dividends consistently. Even better, find those that have been increasing their dividend payouts over the years. It's a sign of a healthy investment.
2. Dividend Payout Ratio:
Keep an eye on how much of a company's profits are doled out as dividends. Let's say Company A pays $90 per share annually, and that's just 50% of its profits. Meanwhile, Company B pays $70 per share but dishes out a whopping 80% of its earnings. Company A is the smarter choice here because it offers higher dividends while still reinvesting a good chunk of its profits for growth.
3. Earnings Stability:
Dividends come from a company's earnings. If a company's earnings are taking a nosedive, yet they're still paying high dividends, it's a red flag. Steer clear because that's not a sustainable situation.
4. Debt Level:
Take a peek at a company's debt situation. High levels of debt can lead to a halt in dividend payments, as they might need to focus on repaying that debt.
5. Share Prices:
Healthy companies tend to see their share prices rise over time. If a company's share price has been stuck in neutral for the past two decades, even if they offer tempting dividends, it's probably not the best bet.
Remember, you can use these criteria not only to pick excellent dividend stocks but also to reinvest those dividends. It's like planting the seeds of your financial future. In 20 years, you can decide to start cashing in those dividends when you retire.
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In PNG, BSP and Newcrest pay some of the highest dividends.
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In the wise words of Warren Buffett, "If you don't make money while you sleep, you will work until you die." So, let your money work for you by investing in the right dividend stocks!
