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It can be tempting to get into stocks that are offering high dividends. In fact for an investor the dividends can make up a huge amount of your total profit from that investment.

But there are a few things you are going to want to consider looking at if you are investing for the dividends.

1. Find out how much you are willing to take.

You should have a minimum amount you are willing to accept from your dividends. For example, if you only want to look for returns with a dividend of 7% annually or higher don't look at companies that are only offering a dividend of 3% annually. Remember the higher you ask for the harder it will be for you to find it.

2. Find stocks with dividends

After you find out how much you are willing to take you should go find stocks with a good dividend yield. Only invest in stocks or ETFs with a strong return.

3. Find stable companies

Obviously getting a 10% annual dividend isn't going to help you if the stock's price falls 80%. You are going to want to search out for strong companies with strong growth before you ever invest in it. When you buy for the dividends you buy for the long term so buy something that will be around for a while.
Stocks that are hot right now normally do not make a good return for an income investor because they can fall and fall hard.

4. Preferably growth

There is more ways to profit from a stock then its dividend. It would be nice to buy a strong undervalued company with a strong future and strong dividends. I believe it is very important to look for strength; dividends are not enough to make you profitable on a trade. The company has to be worth investing in even if it didn't pay dividends.

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1 comments

share tips said... @ May 31, 2011 at 6:57 AM

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